It’s Your Local Car Dealer’s Fault that a Congressional Auto Bill Failed

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The NYT, never an institution to quit when it’s behind, continues its crappy reporting on the auto crisis. In today’s installment, Micheline Maynard uncritically regurgitates GOP spin on why the auto bill failed last night, buying the GOP claim that it’s the UAW’s fault that Congress couldn’t give the auto companies a loan.

Opponents of a Congressional bailout for Detroit auto companies laid blame for its defeat Friday on the United Automobile workers union, which refused to agree to grant wage concessions in 2009 as a condition of the deal.

The entire article continues by totally misrepresenting the reason the UAW refused the GOP "deal."

Representatives for the union, which had already accepted a series of cuts in its current contract, sought instead to push any more concessions back to 2011, when the U.A.W.’s contract with Detroit auto companies expires.

Um, no. As the quotes included in the article make clear, the problem wasn’t starting concessions now. The problem was completing them by an arbitrary date within the next year. 

In a statement Thursday night, the union said it was “prepared to agree that any restructuring plan should ensure that the wages and benefits of workers at the domestic automakers should be competitive with those paid by the foreign transplants. But we also recognized that this would take time to work out and implement” using programs like buyouts and early retirement offers to bring in new workers at lower rates.

“Unfortunately, Senate Republicans insisted that this had to be accomplished by an arbitrary deadline,” the statement said.

[snip]

Mr. Corker said he proposed that wages and benefits of U.A.W. members be competitive with lower rates at American plants run by foreign rivals — Toyota, Honda, Nissan and B.M.W. — during 2009, and offered the union the opportunity to pick the date next year when the changes, which would be certified by the Labor Department, could be put in place.

See?!?! A deadline–and end point, not a beginning point. (And never mind that you could get mired in the question of what "competitive" means for that entire year.)

Maynard’s big problem, though, is in ignoring the underlying point: the UAW was the only stake-holder being asked to accept such a deadline.

Read more →

Republicans Ask Workers to Give, but Not Small Businessmen or Bond-Holders

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Best as I can tell from the speeches, the takeaway from Bob Corker’s cynical "compromise" bill is this. The US Congress would ask the auto industry’s creditors to take a "hair cut" as follows:

  • The suppliers would not be asked to make a deadline-certain concession
  • The bond-holders would not be asked to make a deadline-certain concession
  • The dealers (who are important constituents in every congressman’s district or state) would not be asked to make a deadline-certain concession

But..

  • The workers had to make a deadline-certain concession–to lower their own wages so as to compensate for the fact that their employers had signed contracts to–and planned to honor–their commitments to retirees who had worked for the in years past

The Republicans in the Senate are risking crashing the world economy simply because hundreds of thousands of real workers wouldn’t make concessions that the local owners and white collars bankers weren’t asked to make.

And that–according to the Republicans in the Senate–is the American way. 

No Auto Bridge Loan

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Harry Reid: We’re very sorry we couldn’t arrive at a conclusion. But I appreciate Chris Dodd. This man has worked day and night for months. 

I like Shelby too. He hasn’t been heavily involved in these negotiations. But you never have to guess where he stands.

Corker did wonderful work. We weren’t able to arrive at legislation to get enough Republican votes. Corker will work well next year. We have a lot of work to do. 

I hope they appreicate that we worked with the White House on this, and we came up with a bill with the White House. We have not been able to get this over the finish line. Procedure: We’re not going to get to the finish line. Too much difference between the two sides. All of us on this side of the aisle in favor of the bill negotiated with the White House. We’re not going to be able to vote on that. Tomorrow vote on cloture. We would move to proceed on that. As I’ve indicated, we don’t have 60 votes, we won’t cause undue hardship. 10:30 or so tonight, vote on cloture. I don’t think we’re going to get 60 votes. I dread, Mr. President, looking at Wall Street tomorrow. Millions of Americans, dealership, those who work on cars. As I mentioned earlier today, Christmas is approaching. This is going to be a very bad Christmas as a result of what takes place here tonight. Time for talking is over. We should vote and move on to something else. 

Mitch: Talking about the banking bailout. Claiming it was swell. We’ve had the question of the American  auto manufacturers, but very few of us had anything to do with causing their dilemma. 

[Blowing kisses to Bob Corker–why do they pretend he was negotiating in good faith???]

Mitch: Sticking point is whether the UAW is willing to agree to parity pay structure with other manufacuters in this country. Not been willing to give date specific on which parity achieved. At this point, I agree with majority leader to have the cloture vote. 

Cloture at 10:40. Dodd with 10 minutes.

Mitch: Reserve right to check with one member. 

Dodd: reviewing what happened. As my colleagues may know, we’ve had hearings.For the literally hundreds of thousands of people, this will not be a joyous season, because we were incapable of coming up with an answer to save the American automobile industry. It is disheartening. Read more →

Who Killed the Combustion Car?

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I have to admit, it’s pretty gloomy in MI right now. Suppliers are doing quarterly plans–but putting a giant asterisk on the plan saying "If GM fails, we don’t know WTF happens." Ford is trying to anticipate how they can chase down and reclaim the tools from dying suppliers in time to keep their own supply chain alive. And a local environmentally-focused pol and I started plotting yesterday to turn MI into the beacon of new agriculture–not just because we’ve got the foundation to do so, not just because we need to think about what to do when our economy dies completely, but out of spite at the Californians who seem ready to jettison the Midwest and its jobs of late (soon their dying way of irrigation-dependent industrial Ag will be begging MI for a bailout!).

So it’s tough getting back on the automobile beat, when I can just blithely read tea leaves in the Blago mess. That said, readers are rightly kicking me in the ass for avoiding this very important subject. So I’m watching an empty Senate on CSPAN 2 and making a list: a list of all those who, either out of self-interest or because they are salivating to bust the union, have decided to let the American auto industry–and with it, the economy more generally–die. 

That list starts, of course, with the self-interested union-busters: Richard Shelby, Bob Corker, Jeff Sessions. Mitch McConnell has officially jumped onto the union-busting Japanese SUV, though it goes against the interest of a goodly number of his constituents. And Jim DeMint seems anxious to jump to the head of this class, with his call to free car companies from the "barnacles of unionism wrapped around their necks."

Fuck you, Jim DeMint.

But I am taking a perverse kind of solace out of the discovery that the guy who’s on top of all my other shit lists is on top of this one too.

Dick Cheney.

You see, Dick went to Congress to try to get them on board with the idea of saving the auto industry. And that made it worse.

Yesterday, [in spite of Cheney’s similar failure at rallying support for the financial bailout in September] White House nevertheless dispatched Bolten and Cheney to meet with Senate Republicans about the auto bailout plan, where they “heard a barrage of criticism — and offered few satisfying answers.” Read more →

The Wrestling Match over the Auto Bailout

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The press is reporting that a deal has been reached on the bridge loan to the automakers.

But that’s not right. What has been accomplished is the drafting of a bill that will proceed to get beat to a pulp in the Senate. It’s not yet clear whether it will survive that beating.

Here are the outstanding issues:

Busting the Unions or Busting our Economy

A number of Republican Senators still insist that it would be worth busting our economy for the opportunity to bust the UAW.  Note that McConnell has officially joined those holding the auto industry hostage to busting the union–and he’s using the $73/hour lizard lie to do so.  

Senate Minority Leader Mitch McConnell, R-Ky., said the industry’s predicament came from "decades of complicity between management and labor" and that the draft failed to force necessary cuts.

"I will not support a bill that revives the patient with taxpayer dollars yet doesn’t secure a commitment that the patient will change its ways so future help isn’t needed," McConnell said.

"It’s delusional to expect a company that spends $71 per labor hour to compete with a company in a neighboring state that spends $49 per labor hour," he added.

McConnell’s criticisms mirrored those of Sen. Bob Corker, R-Tenn., who has said the automakers and the UAW need to commit to steep cuts in return for aid, namely immediately cutting UAW wages to those at foreign automakers’ plants and accepting half of the money for the retiree health care trust fund in stock.

[snip]

Corker has said he would vote against the bill as drafted so far, and a spokesman for Sen. John Ensign, R-Nev., said he would place a hold on any rescue plan, which can be overcome with 60 votes.

Note on implication of this: if McConnell is going to insist on bringing the lizard-lie number in line with the Japanese manufacturers (that is, the hourly wage plus retiree benefits), it would require bringing the hourly pay of UAW employees below that of Toyota employees (since the Toyota employees’ wages don’t get advertised as including retiree benefits). In other words, McConnell isn’t just talking about bringing wages down, he’s talking about really busting the union. 

Busting the Environment or Busting our Economy

In addition, there are a number of Republicans–including some at the White House–who prefer to bust our economy than agree to the assertion that our emissions need to be raised. Read more →

Hysteria over a $15 Billion Loan, But Not $285 Billion in Takeovers?

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Man, the NYT’s pathetically bad reporting on the auto bridge loan continues.

David Sanger writes a story purporting to be news that presents a loan to the auto industry–with conditions–as a crisis of capitalism of epic proportions.

But what Mr. Obama went on to describe was a long-term bailout that would be conditioned on federal oversight. It could mean that the government would mandate, or at least heavily influence, what kind of cars companies make, what mileage and environmental standards they must meet and what large investments they are permitted to make — to recreate an industry that Mr. Obama said “actually works, that actually functions.”

It all sounds perilously close to a word that no one in Mr. Obama’s camp wants to be caught uttering: nationalization.

Not since Harry Truman seized America’s steel mills in 1952 rather than allow a strike to imperil the conduct of the Korean War has Washington toyed with nationalization, or its functional equivalent, on this kind of scale. Mr. Obama may be thinking what Mr. Truman told his staff: “The president has the power to keep the country from going to hell.” (The Supreme Court thought differently and forced Mr. Truman to relinquish control.)

The fact that there is so little protest in the air now — certainly less than Mr. Truman heard — reflects the desperation of the moment. But it is a strategy fraught with risks.

The first, of course, is the one the president-elect himself highlighted. Government’s record as a corporate manager is miserable, which is why the world has been on a three-decade-long privatization kick, turning national railroads, national airlines and national defense industries into private companies.

The second risk is that if the effort fails, and the American car companies collapse or are auctioned off in pieces to foreign competitors, taxpayers may lose the billions about to be spent.

And the third risk — one barely discussed so far — is that in trying to save the nation’s carmakers, the United States is violating at least the spirit of what it has preached around the world for two decades. The United States has demanded that nations treat American companies on their soil the same way they treat their home-grown industries, a concept called “national treatment.” [my emphasis]

"Not since Truman," Sanger writes, "has Washington toyed with nationalization."

"Not since Truman," that is, so long as you ignore the very recent nationalizations of AIG, Fannie, and Freddie.

Read more →

The (Draft) Auto Bridge Loan Plan

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Here’s a copy of the draft plan. It closely resembles what we’ve been hearing: the designation of an "auto czar" (AC–though it is called a President’s Designee) who will dispense funds to those auto companies that need it, with the requirement that by March 31, the companies restructure with the oversight of the AC. The AC is empowered to assist in negotiations with retirees, unions, dealers, and creditors right now, but can come back to Congress and ask for more authority if need be (presumably, in case this person had to make bankruptcy court type decisions). The taxpayers get warrants and or a piece of Cerberus in exchange for their trouble.

Note, the AC must be picked by the first of the year. In other words, George Bush, not Barack Obama, will get to choose the AC.

Here are the other interesting details:

There’s one clause which I’ve dubbed the "Nancy Pelosi clause" requiring the car companies to drop their suits against increased emissions standards in CA and other states:

(g) WITHDRAWAL FROM CERTAIN ACTIONS.—The terms of any financial assistance under this Act shall prohibit the eligible automobile manufacturer from participating in, pursuing, funding, or supporting in any way, any legal challenge (existing or contemplated) to State laws concerning greenhouse gas emission standards.

And there’s a clause which I’ve dubbed the "Atrios clause" requiring car companies to consider moving some of their SUV capacity into producing transit vehicles:

(a) IN GENERAL.—Each eligible automobile manufacturer which receives financial assistance under this Act shall conduct an analysis of potential uses of any excess production capacity (especially those of former sport utility vehicle producers) to make vehicles for sale to public transit agencies, including—

(1) the current and projected demand for bus and rail cars by American public transit agencies;

(2) the potential growth for both sales and supplies to such agencies in the short, medium, and long term;

(3) a description of existing ”Buy America” provisions, and data provided by the Federal Transit Administration regarding the use or request of waivers from such provisions; and

And there’s a provision I’ll call the "Delta/Northwest clause" which requires the car makers to get rid of their corporate planes:

Read more →

Dan Quayle and Cerberus Holding American Economy Hostage

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(Graphic by twolf)

Chris Dodd has signaled that he will let Dan Quayle’s Cerberus hold GM–and the American economy– hostage to get out of its crappy gambling bets.

Senate Banking Committee Chairman Chris Dodd said General Motors Corp. Chief Executive Richard Wagoner should be replaced as a condition of federal aid and Chrysler LLC may have to merge to survive.

[snip]

“Chrysler, is, I think, basically gone, probably ought to be merged,” Dodd said. Ford Motor Co. is the healthiest domestic automaker, he said.

Chris Dodd is right: Chrysler undoubtedly has to merge to survive. That’s partly because it does not have the global reach of GM and Ford. Because GM and Ford have significant sales in China and India and other quickly growing markets (which have been netting much higher profits), they can offset lower profits or even losses here in the States. But Chrysler doesn’t have that, so it can’t become profitable–across all its operations–as quickly as GM or Ford can. 

Chrysler also doesn’t have the product development pipeline its domestic competitors do. Ford has had increasing success of late offering either new US models on Mazda or Volvo chassis (like the Fusion, which competes well in quality and safety with the Accord and Camry), or bringing successful European models to the US (Focus in the past, and Fiesta and Mondeo in the near future). GM has the new Malibu (which is also gaining market share in the sedan segment), with the Cruze and Volt in the works (as well as any Opel models it decides to bring to the US, though the threats to shut down Saturn don’t bode well on that front). Chrysler’s got nothing equivalent. 

But understand: GM acquiring Chrysler–which is the most discussed option–offers little benefit to GM. Sure, the merged company would get to sell either the Renaissance Center in downtown Detroit or Chrysler’s fairly new digs up north; you could find efficiencies in headquarter structure (if you were a healthy company to begin with). But everyone agrees that two of GM’s most urgent problems are that it has too many brands and too many dealerships. And you want to fix that by making it take on 3,300 more dealers and three more brands? This is Congress’ idea of a really smart restructuring?

Making a Chrysler bailout contingent on GM’s acquisition of it is two things. First, a refusal to do the most logical thing with it, nationalization. Read more →

Three Auto State Senators “Said in a Statement”

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For an example of just how crappy the reporting on a potential auto bridge is, check out this NYT article. Its title announces "Republicans Divided on Aid to Automakers." Yet the part of the article that purportedly tells that story consists solely of statements of the four most invested Republican Senators on the issue.

Kit Bond (who co-sponsored past efforts with Carl Levin):

“I’m glad the Democratic leadership has embraced the principles of the Bond-Levin bill to hold auto companies accountable, protect taxpayers and save millions of American jobs as we head into the holiday season,” Mr. Bond said in a statement.

Bob Corker: 

“Based on the outline we’ve seen so far, we are disappointed,” Mr. Corker said in a statement. He reiterated his demands that the automakers make aggressive efforts to cut labor costs and reduce their overall debt obligations before receiving any aid.

“These are the same types of conditions a bankruptcy judge might require to ensure that these companies become viable and sustainable into the future,” Mr. Corker said. “And if they will agree to these terms, then we have something to talk about.”

Mitch McConnell:

“I look forward to reviewing the legislation being drafted to address the difficulties in our auto markets,” Mr. McConnell said in a statement. “As we consider this legislation, our first priority must be to protect the hard-earned money of the American taxpayer.”

And a gratuitous inclusion of Richard Shelby, though he apparently hasn’t issued any new statement, but somehow gets included, based on no apparently new reporting:

The senior Republican on the banking committee, Senator Richard C. Shelby of Alabama, has said he will oppose any taxpayer-financed bailout for the auto industry, and other fiscal hawks are likely to join him in opposing the measure.

This is what counts as reporting these days for the NYT. Three official statements probably gleaned from press releases, thereby letting those most invested in this debate stand in for those who will determine its outcome.

In spite of the fact that every single Republican listed (along with Carl Levin) is an auto state Senator of one sort or another, David Herszenhorn doesn’t apparently consider that information to be noteworthy (indeed, he attributes Shelby’s opposition to any bailout to fiscal conservatism, not anti-union ideology and home state self-interest). Read more →

The Giant Pissing Contest over the Auto Bridge

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(Mackinaw Bridge photo from Three if by Bike) 

Ian and Jane described the solution Dems are crafting on the auto bailout: Roughly $15 billion from the DOE funds (originally intended to help automakers retool to make more efficient cars) would be repurposed into providing bridge loans for Chrysler and GM. After President Obama and the new Congress come in, that money will be replaced with TARP money, and a longer term plan will be developed to see the companies through this crisis.

Keep in mind though: this is just one battle in a giant pissing contest that is far from resolved. There have been three original positions in this pissing contest:

  • Pelosi, Dodd, and Frank (and, presumably, Obama): Give the aid from TARP; save the environment and the domestic auto industry
  • Bush, Paulson, and McConnell: Give the aid from the DOE funds after asking for the first born of every union worker
  • Shelby and Corker: Bust the union and to hell with Toyota’s domestic competition and the Democratic voters it employs

A couple of events set the background to hearings in the last two days. Hank Paulson has begun calling for the second half of the TARP funds, as he has blown through most of the first $350 billion. Yet Democrats want to force Paulson to start bailing out homeowners struggling to avoid foreclosure, rather than just bailing out Paulson’s friends on Wall Street.  And since Paulson wanted to avoid spending any TARP funds on the auto industry, he wanted to avoid discussing TARP before the auto crisis was resolved.

In fact, in a stunning bit of arrogance that no one besides Jane really reported, Dodd had asked Paulson and Bernanke to attend Thursday’s Senate hearing on the auto crisis–and they refused! These assholes, who are preparing to ask Dodd for another $350 billion of our money, refused to show up before Congress, presumably because they simply didn’t want to talk about using TARP funds for bridge loans to the auto industry (note: at the hearing GAO agreed with Dodd that the auto loan request would qualify under TARP guidelines). I suppose because they simply believe the auto industry doesn’t fall under their mandate to keep the economy healthy?!?!

And then, of course, yesterday’s jobs report came in, with the news that our economy is hemorrhaging jobs. Which is reportedly when Pelosi blinked, and agreed to use the DOE funds.

Read more →