Les Jones

Guess which carmaker is worried sick about the future?

Saturday, October 3rd, 2009 | Economics | Permalink | No Comments |

You’d think it would be Chrysler or GM. Nope.

In a rare example of corporate accountability and humility, the president of Toyota, arguably the best run auto company in the world, Akio Toyoda, had some very harsh words for not just his company’s recent decline, which he characterized as “grasping for salvation”, but for his own failure at prevent this collapse. One wonders when Mr. Toyoda’s American counterparts, whose own failures are orders of magnitude worse, will admit even a minor fraction of comparable culpability.

Tags: chrysler, gm

GM undoes paycuts to white collar employees

Saturday, September 12th, 2009 | Economics | Permalink | No Comments |

Well isn’t that special?

Related: U.S. taxpayers are unlikely to recover their $81 billion investment in General Motors Co. and Chrysler Group LLC. Gee, can’t imagine why that would be.

Here’s a crazy idea. Let failed business go under so that good business can take their places. Let good crops expand into the fields of the failed crops. The alternative is to let everyone starve. Bonus - it doesn’t cost taxpayers anything.

Tags: bailout, chrysler, gm

Zombie Chrysler Clearance: Every Link Must Go!

Monday, June 8th, 2009 | Economics | Permalink | No Comments |

Can Fiat put Chrysler on road to recovery? “Fiat is easily the weakest of all the major automotive companies. It does not even generate enough revenue to fund its own investment.” If Daimler-Benz couldn’t turn Chrysler around I’m having a hard time seeing how tiny Fiat could.

Mickey Kaus: “P.S.: Chrysler can learn from its new partner: Chrysler scored second to last in customer satisfaction in this 2009 survey of “vehicle ownership satisfaction” in the U.K.  Only one company did worse! … That company? FIAT. …”

Why is Chrysler closing 789 car dealerships? “Toyota sells more cars than Chrysler with fewer than one-third of the number of franchises. (The average Toyota dealer sold 1,589 vehicles in 2008; the average Chrysler dealer sold 124.)”

Chrysler’s sorry state revealed via Tam:

• Chrysler pays its suppliers 45 days after delivery. So if it suspends production - as it has now - for more than 45 days, the suppliers would have to resume manufacturing without their regular source of revenue. According to Scott Garberding, Chrysler’s chief procurement officer, this imbalance of expenditures and revenues would be “catastrophic” to these marginally profitable companies.

• Chrysler can’t start making 2010 models until it finishes building the 2009 models presently sitting on the assembly line. So the longer Chrysler is shut down, the later its 2010 models will be to reach showrooms.

• Chrysler vehicles are such slugs on the market that 20% to 25% of the wholesale cost goes to dealer incentives, according to Peter Grady, director of dealer operations. Yet not only were there 286,687 2009 models - more than three months supply - sitting on dealer lots at the time of the filing but there were 36,370 2008 models left. In other words, they had been sitting around unsold for more than a year.

Bankruptcy: Cui Bono?

As the administration has pointed out in defense of its plan to commandeer the bankruptcy process, asset sales (known as 363 sales, based on the relevant provision) have become a common feature of Chapter 11 cases in the last 20 years. What makes the Chrysler plan unique, and makes it similar to the receiverships of the New Dealers’ era, is that it is not really a sale at all. It is a pretend sale and its main purpose is to eliminate the pesky creditors who might otherwise interfere with the government’s plans. It also seems to flout bankruptcy’s priority rules by giving Chrysler’s employees (who are general creditors) a big stake in New Chrysler while forcing senior lenders to take a major haircut. The usual rule is that senior creditors must be paid in full before lower priority creditors are entitled to anything.

Why I Am Freaking Out. “BTW, to compare what’s going on at GM and Chrysler today to Chrysler in 1980 is apples and Agent Orange: In 1980, the US government guaranteed Chrysler’s bonds. In 2009, the US government is guaranteeing CHRYSLER—and GM too.)” True. Unlike Obama, Jimmy Carter didn’t promise to warranty the transmission on your Plymouth mini-van. More:

Moreover, Team Obama hasn’t presented any rationale for the de facto nationalization of Chrysler and GM—so what’s to stop any other industry (or union) from asking to be nationalised? I’m not one of these fools who says that any state-run enterprise is “Communist” or “Socialist”—I would prefer bankruptcy for an insolvent business, but on principle I have no problem with a government takeover of a business or industry, so long as there is a clear, compelling, non-trivial, non-political reason, and so long as there is a clear horizon for the exit of the government, if the interference was for exigent or unique reasons. But the arbitrary de facto nationalization of Chrysler and GM through this sham (and probably illegal) pre-pack bankruptcy has no rationale, no raison d’etre, aside from propping up some union (which is receiving a shockingly sweet and possibly illegal deal in the Chrysler case, a deal presumably to be repeated in the imminent GM bankruptcy)—the way it’s being done makes no rational business sense, but makes terrific POLITICAL sense. These are the twin problems with Team Obama and their auto industry meddling: It’s not that they are meddling in the private sector, it’s that they’re giving priority to political considerations over financial or macroeconomic considerations, and they’re meddling without a clear and compelling rationale, opening the door for every private business to seek state subsidy so long as they have the political muscle to get the sweet taxpayer-financed deal out of Team Obama.

Tags: bailouts, chrysler, gm

Indiana state pensions sue to stop Obama’s Chrysler deal

Wednesday, May 20th, 2009 | Economics | Permalink | 1 Comment |

Obama’s plan for Chrysler demoted senior debt holders (whom he maligned as “speculators”) to benefit UAW union members. As a consequence of that decision Obama’s plan shortchanged police and teachers unions who had Chrysler investments in their pension funds. Now the state of Indiana is suing.

As stated in the filings, the US Treasury Task Force is seeking to use the Chrysler bankruptcy to extinguish the property rights of the pension funds as secured lenders, violating the most fundamental tenets of creditor rights in disregard of widely recognized bankruptcy jurisprudence. The proposed restructuring of stakeholders’ rights seeks to make payments of billions of dollars to unsecured creditors, while paying the secured creditors only 29 cents on the dollar.

“As fiduciaries, we can’t allow our retired police officers and teachers to be ripped off by the federal government. The Indiana state funds suffered losses when the Obama administration overturned more than 100 years of established law by redefining ‘secured creditors’ to mean something less,” explained Treasurer Richard Mourdock. “The court filing is aimed not only at recouping those losses but also reasserting the rule of law and preventing the federal government from pursuing policies that strike at the heart of the capital system.”

It’s Economics In One Lesson again: “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”

Previously: Obama’s GM plan pits unionized retirees against non-unionized retirees

Tags: bailout, chrysler, obama, pensions, unions

Obama’s GM plan pits unionized retirees against non-unionized retirees

Wednesday, May 13th, 2009 | Economics | Permalink | No Comments |

Bloomberg - GM Retirees Bully Bondholders With Obama’s Help:

General Motors Corp.’s likely bankruptcy filing is being cast in some quarters as a fight between “money people” intent on making a killing and honest efforts by the government to save a company and jobs.

In reality, GM’s demise comes down to a fight between retirees.

Under the restructuring plan on the table, GM’s retirees would get 39 percent of the company, along with the promise of a $10 billion payment into their health-care trust fund. That is in exchange for $20 billion GM owes the fund.

Not making out so well are current or future retirees who depend on the performance of mutual funds, 401(k) plans and insurance companies that invested in GM bonds. These debt investors, who are owed about $27 billion, will get just 10 percent of the company.

On one side are GM’s unionized retired workers. On the other, are the rest of us — either in retirement or saving for it. Guess who will lose as things now stand?

And needless to say the Chrysler deal falls along similar lines, screwing investors of all sizes for the benefit of the United Autoworkers Union. Someone wins, someone loses, and funny how the people who give the most money to politicians generally win.

Hat tip to Instapundit.

Tags: chrysler, gm, unions

Chrysler gets $7.2 billion in free taxpayer money

Thursday, May 7th, 2009 | Economics | Permalink | No Comments |

CNN - Chrysler won’t repay bailout money:

Chrysler LLC will not repay U.S. taxpayers more than $7 billion in bailout money it received earlier this year and as part of its bankruptcy filing.

This revelation was buried within Chrysler’s bankruptcy filings last week and confirmed by the Obama administration Tuesday. The filings included a list of business assumptions from one of the company’s key financial advisors in the bankruptcy case.

Some of the main assumptions listed by Robert Manzo of Capstone Advisory Group were that the Treasury would forgive a $4 billion bridge loan given to Chrysler in the closing days of the Bush administration, a $300 million fee on that loan, and the $3.2 billion in financing approved last week by the Obama administration to fund Chrysler’s operations during bankruptcy.

So not only is the government picking winners and losers to bailout, they’re pumping up some companies with free money that never has to be repaid. Remind me again why some companies get this money and some don’t?

For the record, I don’t think any company should simply be given taxpayer money without expecting to repay it. Companies that can’t make it on their own should go out of business. Propping up zombie companies with free government cheese hurts healthy companies like Ford that have to stand on their own to feet and compete in the marketplace.

All of this is on top of alleged White House threats to Chrysler bondholders to play ball or have the White House destroy them in the court of public opinion.

Who the fuck do you think you’re dealing with? We’ll have the IRS audit your fund. Every one of your employees. Your investors. Then we will have the Securities and Exchange Commission rip through your books looking for anything and everything and nothing we find to destroy you with.

Tags: bailouts, chrysler

Chrysler’s Nerf bankruptcy is bad for American automakers

Monday, May 4th, 2009 | Economics | Permalink | No Comments |

Mickey Kaus:

If Chrysler fails in the marketplace again two or three years from now, after billions more in government subisidies, won’t that reflect badly on Obama and his “economic team”? WIll it then appear to have been better to let Chrysler go into an actual, non-prearranged, non-jawboned bankruptcy, in which it would likely have been liquidated or in which the UAW would have had to make far more substantial concessions, like workers in other bankruptcies? The government could have assumed some of the U.A.W.s pension and health care liabilities (which it will probably end up doing, in part, in any case). But Chrysler’s demise would have been a real cautionary example that gave the administration leverage in the GM negotiations (which may be what the U.A.W. was really scared of). Chrysler’s rapid departure would also have opened up market share for GM–and for Ford, which is not wildly healthy itself.

Chrysler was bailed out once in the 80s, failed again, was bought by Daimler, was disgorged by Daimler, was bought by turnaround vultures Cerberus, and failed again. It’s about time they died already and the parts were sold off. People still want Jeeps and Dodge pickups. If the world can live without Neons and Plymouth mini-vans then so be it.

We’d be better off with one or two healthy American car companies than one healthy American car company that starts with an F that has to constantly fight off the two zombies being kept alive by our government. Let Chrysler die so Ford can live.

And maybe GM. When I get so old I have my pants hitched up to my armpits I might actually want a Cadillac. I can’t imagine being senile enough to want a Chrysler.

Tags: bailouts, bankruptcy, chrysler, gm