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Peters does good, calls McCain's bluff on viability of Chrysler
Mr. H.,
But, but, but John McCain is a WAR HERO, and is a STRAIGHT TALKER, and has a pretty wife, and..and... and has always been a knuckleheaded, loudmothed hypocrite, valorous naval and POW service notwithstanding.
He talks like he knows something about making money, or investing, or something besides his big mouth. In fact, had he not married well (extremely well, if you ask me) he would likely be living nicely on a government pension somewhere, assuming e followed prudent investment advice.
All that aside, I think (and have posted same) that the nation would have been better off, on balance, had GM and Chrysler both been brought to task before the bar. The government takeover of this industry will rebound in ways not yet apparent, and it is not going to be pretty. This opinion does not make me a McCainac.
Thanks for a good post. Post more often!!
Regards,
Brian Reilly
Testy vote, strained relations 'should be the end of the Int'l UAW'
The link at the bottom of your blog was harsh, but not essentially wrong. The author did not spend any time excoriating management for facilitating the UAW over the decades, but that is food for another column.
This should be the end of the International UAW. If the locals (many, not all) reject a pact recommended by the International, I cannot think of any reason for the locals to continue to send money to Solidarity House. Especially those locals too far afield to enjoy the union golf course ....
It will not be too long before the International has to sue locals to get their cut of dues income, and that will be that. Cradle to grave in 75 years, just like most people. Pity.
BR:
An institution that cannot adapt to the changing times is an institution that cannot survive in its present form. Union or corporation, university or newspaper, the ability to evolve, respond and reflect core values in contemporary society is what keeps 'em alive ... or sends them to the dustbin of history. We don't know what the repercussions of that vote will be, but there will be some.
-- DCH
Pay-to-play in Detroit shows how different -- and dysfunctional -- Motown really is
What the practice of reverse campaign contributions says about Detroit is that Detroit is fundamentally culturally different than much of the rest of the nation. The unseemly practice of tailoring one's political campaign in order to garner support from the PAC crowd is turned on its head. In Motown, it seems, the PAC tailors its endorsement to garner a donation from the candidate.
Oddly enough, I can see the point in it. Bizarre at it may seem, the PAC's in Detroit do not have any money,but they do get press and claim to be able to turn out voters. The leaders of these PACs need to get paid somehow. The candidates can get money from other sources, and want press and votes. There you are, all the ingredients of a sordid political deal meet, and the thing is done. In some ways, it is no worse than the candidate who sells out for the endorsement of a PAC in the conventional sense, it is just fundamentally different. Instead of the PAC owning the candidate, the candidate owns the PAC. Like Detroit. Very different.
This is another odd little tale that reflects how things have changed, and gives some indication of where things are headed. Detroit has been the City of the Future. That has been good, and sometimes not so much. More and more interesting.
Hopes for Detroit Public Schools pinned to Bobb, et al.
I think that Mr. Bobb is the ONLY ray of reasonable, competent sunshine I have seen associated with Detroit (Including the auto companies, the City [No offense, Mr. Bing], schools and the state) in a long time. A no-nonsense man with his heart in the right place and the gloves off. I wish him well. If he wants to continue the difficult task he undertook for a limited term, hire him.
Schools reflect the community, not the other way around. If the DPS, under Bobb or anyone else, turns the corner on apathy and corruption, it will be an indication that the city has also. It is way too soon to think that turn has happened. Mr. Bobb has slowed the descent. If he can stop or reverse it, that will be a sure sign that things are getting better in Detroit, and not before.
BR:
Well put. Big job, massive challenges. And you're right: schools do reflect a community and its values -- or the lack thereof. Bobb, the people jumping in to help him and the parents responding to their accomplishments so far speak to the discovery of standards buried under a mountain of corruption, incompetence and self-dealing. The response is almost as encouraging as the actions itself.
-- DCH
Auto sales tank, life gets 'tough and tougher' for Detroit Three
Boy howdy! The hole keeps getting deeper. With truck sales off (Is it by MORE than 60 percent?) and overall sales still sliding, what is the plan? I guess GM and Chrysler are good to go as long as the Feds stand behind them, but ... really ... how long?
Ford can just manage, I guess, but if F Series does not regain some ground, I do not see any real profit in a car-based line up. Do you? Does anyone?
Tough, and getting tougher.
BR:
Lots of issues there. Would make coupla' points: First, the whole intent behind Ford's model line rejiggering is to ensure that the cars and car-based products coming from Europe do, in fact, deliver dollars to the bottom line. They will, but how much -- especially as F Series sales settle into a more terrestrial grove?
Second, how long do you think American car buyers, in general, will keep their hands in their proverbial pockets and keep sales running at a 10-million-unit rate, plus or minus? If credit remains tight, as it likely will for some, that could be awhile. But I have a hard time believing the consumerist in American consumers is gone for good.
Third, no question these will be tricky months for GM and Chrysler, still assessing how much damage they've sustained in their federal bankruptcy process. I'm less concerned by the atrocious September numbers, hammered as they clearly were by the "cash-for-clunkers" hangover, and more curious what the balance of the year portends. If we get a 10-percent correction in the Dow Jones Industrials, as some are suggesting this week, and if job cuts accelerate in Q4 when the expectation was for moderation, the slope back for DTW gets steeper.
-- DCH
Cashfor cunkers
Mr. H.,
You neglected to mention that (reportedly) the indirect beneficiaries of the "cash", those persons who traded clunkers in on new iron, will be taxed on at least some of the value.
Now mightn't this be a fine mess? Just what was the value of that clunker? Would the trader have sold it outright for $2000.00, owing tax on the difference? Or is the imputed value of every clunker zero, making each trader liable for taxes on the full $35-$4500? Ordinary income? What if the previous liability for taxes was zero? Will the liability push some people into the AMT zone.
If the government is going to value the trades, what is the benchmark? Regional differentials allowed? How about sending inspectors out, whoops, the motors are all trashed! By dictate of course.
On and on. With the best of intentions (snort), a broken egg, and no omelet in sight.
Regards,
Brian Reilly
Bankruptcy for DTW? 'Only after collapse' will 'rebirth be possible'
Like GM and Chrysler, DPS and The City do not provide enough product at a price that people will happily trade money for. Unlike the two car companies, the potential for a new customer base is very low. Even a bankruptcy is unlikely to wash the appetite for (and desire to provide) something for nothing. Detroit will continue to need infusions of cash, because no one in Detroit generates any net cash.
All the hair-brained schemes and practices have been laid bare for years, yet nothing really changes. Only after a collapse will any semblance of rebirth be possible. Does bankruptcy qualify as collapse? My money is on not.
Detroit is a bellwether, that is what makes it so interesting.
BR:
If the financial collapse of a once-great (if steadily withering) city wouldn't provide the necessary conditions for some semblance of "rebirth," then I'm not sure what would. Why? Because the workout would force fundamental change on the cornerstones of the status quo -- unions, life-long bureaucrats, career politicians and the parasitic vendors who influence political decision-making to help fatten their bank accounts.
-- DCH
Michigan's lost decade: 'We need a new public'
Welcome back. Nice hit with the "lost decade" observation, but "carrying coals to Newcastle" is all it brings up to me. Of course people are reluctant to climb out of the rut. They have become comfortable in the rut, and only hope to have their rut get less muddy, and be the dry rut they enjoyed so much, for so long. As you say, ain't gonna happen.
The problems afflicting Michiganders, and Americans, and much of the rest of the world have been decades in the making and will be decades in resolving. We borrowed money to fund consumption (of everything from trinkets to cars to health care to the retirement of the hale) and cannot -- CAN NOT -- pay it back. The effective bankruptcy of our civilization, and the founding of a new, post-bankruptcy civilization, is just beginning.
There is no precedent for this, and no president or governor or CEO is going to push it through the court on a fast track. It is just going to be a long, hard slog. The natural attributes of Michigan, previously detailed, will out, but it will be a while.
Years ago, after an election went the wrong way, the politician who lost opined that "We need a new public." He was right, in a way. It will take a new public before Michigan gets on to a new and better track. Until then, fish or cut bait.
BR:
"A new public?" Interesting thought, that. Kinda' like a company that needs new customers or a country that needs new voters cuz the existing ones always can be counted on to make the wrong choice. (Sound familiar, Detroiters?) We are, it's safe to say, being forced to come to terms with the consequences of our affluence -- here in Michigan and nationally. The tide's been more or less continually rising for as long as most sentient folks can recall -- housing values up, 401(k) balances up, credit limits up. And the politicians (R and D) have been only too happy to spend the revenue generated by that wealth because a plurality of us like it that way. See a pattern?
I do, however, dissent from your blanket statement that "no president or governor or CEO is going to push ... through," as if leadership and policy do not and can not matter. They do and what they do (not what they say) matters. Business matters, because it creates jobs. And, no, that's not a coded call for a return to the Robber Barons. It's about balance, and right now that balance is swinging hard left. It won't work, unless your definition of "work" is lower economic growth, lower job creation rates, permanently higher unemployment and higher tax rates.
-- DCH
Feds won't micromanage GM, but they will milk it -- one way or another
"We are here to get the government out of the auto business" says the administration flack. Well, son, there is more than one way to get the government out of the auto business. One is to spend the taxpayers money on an enterprise so fatally flawed that, despite every honest and good hearted effort to make autos that will sell at a profit, it just cannot be done. Then, sooner or later, the government will be out of the auto business.
Another is to place so much pressure on the other manufacturers and retailers of autos that NOBODY can make any money, and the market goes away. A long stretch, I admit, but not impossible. That is another way out of the market.
What Mr. Rattner has in mind is the government arranging for a quick IPO that the stock jobbers will snap up, allowing the government to sell their stake. This is highly unlikely. The government would have to pay someone to take their stake in GM or Chrysler, and thus will not be out of the business.
So you see, the government is in the auto business until they either get tired of losing our money, or until there is no longer a market for autos. Talk about the thing that would not go away!
BR:
Lots of variables here, pal. Thing to watch is what they do and how much they "let" the bosses of the "New GM" actually run the biz. And they'll be doing it with GM lifers because the government restrictions on exec pay make it virtually impossible for GM to woo outside talent for top jobs.
-- DCH
July 10th, or else ... is just the beginning for GM bankruptcy
Why anyone finds any of this surprising is beyond me. OF COURSE GM is in a difficult spot. Their business is worthless, supported only by payments made at the point of a gun. Left to voluntary circumstances, former GM facilities would either be working under new owners or in the process of sale (or abandonment) per bankruptcy as we once knew it.
This will not long work. Soon, and long before these pensioners are dead, the [pension] funds will be broke and the political winds will no longer blow money into their accounts. How long will it take? That is the only question. Not if, but when.
BR:
Point taken. Not sayin' who, but had a conversation recently with a seasoned senior exec in the DTW auto biz who predicted a GM bankruptcy and whoever is controlling the federal government -- i.e., Barack Obama or his successor -- will be bedeviled by GM's pension fund. His argument: That the fund's assumptions, as The Times story ably describes, do not account for the massive hits it is taking from buyouts and early retirements.
Meaning an no less than an American president -- as opposed to some anonymous bureuacrat -- likely would be faced with choosing between dumping the obligations squarely on American taxpayers, stressing the federal pension insurer and enraging Congress, or forcing a cram-down of lesser benefits on current and future pensioners. You make the call.
-- DCH
Granholm? GM? Bankruptcy? 'Political games' running wild
Not surprising that JG did not get the nod from the president. Enough of that, the interesting news is the settlement that the UAW made for under 20 percent of the new issue of GM stock.
Clear to me is that all talk of value, dollars, shares, credit, assets, secured positions, all are out the window. None of it is important or a point of consideration. This is just a game, a political horse trade without reference to anything else.
Mr. Obama is getting into deep water, and carrying more and more Americans with him every day. If, as I believe, GM (Chrysler is doomed and will not be back) will shrink to nothingness in a short time, what will be next? This bag of borrowed dollars will be empty, and need to be refilled by ... whom? What will he tell his cohorts then? What will they say to him?
The show ain't over, it has not even started yet.
BR:
It's also a game that carries enormous political risk for the president and his administration. He's changing the rules of American capitalism, U.S. bankruptcy law and, arguably, the market itself with what amounts to a $50 billion bet on the "New GM." What if he and the masters of his auto task force are wrong -- that Americans won't buy Chevys, Caddies and Buicks, whatever the incentives and guarantees designed to persuade them?
-- DCH
Obama, CA, Granholm to learn 'passing laws does not make market'
Jeez, seems like you are taking a licking from your posting friends! Keep at it, you are a lot more right than wrong.
Mr. Obama is soon going to learn that passing laws does not make a market. 35 mpg in 2016, huh? Seems kind of convenient to me. I wonder how much the U.S. Treasury might have "invested" in GM and Frysler by then? On the other hand, just think of how tax credits might be employed as a marketing tool. Maybe they can get Lido back for another round of commercials: "Buy a car, get a credit"!
More and more interesting, every single day.
BR:
Interesting doesn't begin to describe the historic, techtonic shifts we are witnessing daily. One hundred years of automotive history morphing into who knows what; a government using the opportunity to "save" an industry as an opening to shape what survives how it sees fit; a union that helped defined the American Middle Class facing an existential threat that can only be muted by intervention from the feds; the fate of thousands of family businesses -- dealers and suppliers, for starters -- and hundreds of communities decided a small group of people meeting in Washington and Detroit.
Interesting? Yes. And extraordinary.
-- DCH
Granholm to Supremes: 'She just is not strong enough to lead'
If I were you, I would be pushing HARD for Ms. G. to be named to the seat. She has so little to look forward to here in Michigan. A new challenge in DC would perk her right up. Why, she and Dan could send the girls to District schools and all. [The Gran-hern girls are in college, I think, or soon will be.] She would be living in a cool city, with a lot of her intellectual cohorts. And Michigan would be rid of her. [Lt. Giv. John]Cherry could not be any worse. He might even take the bull by the horns for the next budget cycle, figuring if he loses a round he does not have to run.
It does not really matter, much. Lame as Granholm is, the problems Michiganders have, and their lack of willingness to squarely face them, preceded her and will likely last well after she is gone. She just is not strong enough to lead. Given her abundance of empathy and clear desire not to lead, she might just make an ideal associate justice.
BR:
OK, lemme get this straight: We pull for BHO to appoint her to the Supremes so we can get her out of the Big Mitten 18 or so months early ... just to be stuck with her logic and strong philosophical core for the rest of our natural lives? I'll take 18 more months of riding the wave because I can't imagine this president plumping for a no-judicial-experience governor with the nation's worst economic record as his first nominee to the Supreme Court -- unless he's not as smart as everyone says he is.
-- DCH
Deaf dumb, blind: Michigan's 'fiscal house is on fire'
Michigan does not have the option of bankruptcy available to private industry. I suppose some sort of debt repudiation or default is possible. I do not know. What is clear is that the fiscal house is on fire, and the State is not trying to put it out. All they are doing is trying and failing to keep the fire from getting bigger.
Now, Governor Granholm and a lot of the legislators in Lansing will not be around at the end of 2010. They'll leave the fire scene. My bet is that a lot of them (especially Granholm) will leave the state entirely. The fire will be bigger, and a new shift of firefighters will be on the scene.
Michigan state government and a lot of local units are going to be wards of the federal government before long. Where else are they going to get the money they need? Do you really think that state services, base staffing levels, and total compensation issues are going to be resolved by cuts? If so, why, and by whom?
BR:
Seems to me you have it sussed out just about right. Stall by ordering a modicum of cuts and using BHO dollars. Get to the end of 2010. Leave office; leave the state; leave the mess, the biggest in Michigan's modern times, for a bunch of new saps to fix. And do it knowing that solutions were offered, ignored and offered again, but they were too hard.
We've seen this movie, BR. It's called "Detroit's Big Three and Big Labor." Wanna know how it ended? Look to bankruptcy court in the southern district of New York and General Motors Corp.'s unfolding survival plan.
-- DCH
Chrysler bondholder interests
Mr. H.,
As ugly as the money business can be, at least the interests people have in it are up front. I wish the same could be said of the political business, where the currency is power, and concealed wherever possible.
The sort of "assistance" that the US government is "providing" to banks and automakers is purported to be in the interest of the nation. We shall soon see that this assistance will assist us all into a pen.
Who will want to venture capital under such mutable terms? Why will anyone ever again bother to take a flyer on a long shot investment (Whether junk bonds or start up capital) if they know that the government can step in any time they want? "I want a seat on the Board. You, boy, GET A HAIRCUT" "Yes sir, Mr. Congressman, any thing you say, SIR."
Stranger and stranger by the day. Creaks and groans are all I can hear, as the whole structure begins to collapse. Pardon me if I wait in the street.
Brian Reilly
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