GM’s Alleged TARP Repayment – Obama Adminstration Helping GM Avoid TARP Tax

As we now know, GM used “new” TARP money to “repay” one of the original TARP loans it received.

One of the motivating factors for this “money shuffle” was to generate positive “Public Relations Press” for both GM and the Obama Adminstartion.

Now it appears thata a secondary motivation was to allow GM and its Union to escape paying the “Financial Crisis Responsibility Fee, also known as “The TARP Tax.”

The following is Senator Grassley’s letter to Treasury Secretary Geitner:

Dear Secretary Geithner:

General Motors (GM) yesterday announced that it repaid its TARP loans. I am concerned, however, that this announcement is not what it seems. In fact, it appears to be nothing more than an elaborate TARP money shuffle.

I am also troubled by the timing of this latest maneuver.  According to Mr. [TARP Special Inspector General Neil] Barofsky, Treasury had supervisory authority over GM’s use of these TARP escrow funds.  Since GM’s exit from bankruptcy court, Treasury had approved the use of the escrow funds for costs such as GM’s obligations to its parts supplier Delphi. According to the GM 8K, GM had planned to use the TARP funds in escrow to pay back the TARP loans on a quarterly basis beginning in the fourth quarter of 2009.  But following the April 20, 2010, hearing of the Senate Finance Committee, where Treasury’s decision to exempt GM from the bank TARP excise tax was questioned and GM’s refusal to testify was noted, it is odd that GM suddenly drew down on the TARP escrow and accelerated the repayment of the remaining balance of GM’s outstanding TARP loans.

The bottom line seems to be that the TARP loans were “repaid” with other TARP funds in a Treasury escrow account.  The TARP loans were not repaid from money GM is earning selling cars, as GM and the Administration have claimed in their speeches, press releases and television commercials. When these criticisms were put to GM’s Vice Chairman Stephen Girsky in a television interview yesterday, he admitted that the criticisms were valid:

Question:    Are you just paying the government back with government money?

Mr. Girsky: Well listen, that is in effect true, but a year ago nobody thought we’d be able to pay this back.

http://www.thetruthaboutcars.com/grassley-was-gms-payback-shuffle-about-avoiding-the-tarp-tax/#more-353869

Has The Economic Recovery Started? Is The Worse Over? The Unvarnished Economic Data

This headline greeted me this morning:

World markets surge as US data boost recovery hope

http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

US Data? What US data can they be talking about? GM, Chrysler and Ford posted huge additional losses. http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

The article then went on to say some very surprising things: “Nearly every sector in Asia charged higher, with carmakers like Toyota Motor Corp. and Nissan Motor Co. rallying on U.S. auto figures that were less dismal than feared.” Really, rallying on US auto figures – just what were those figures? Less dismal? They seem very dismal to me – after all you didn’t expect car sales to be zero did you?

‘Investors were encouraged after U.S. car sales jumped by nearly 25 percent last month from February, beating the typical rise and underpinning hopes of a turnaround in the American auto market — critical for Asia’s giant auto companies.’ What? Auto sales “jumped” by 25% last month – I don’t believe it, do you? (I don’t believe it for good reason – I know the real numbers).

SEE: http://www.msnbc.msn.com/id/30024711

https://mcauleysworld.wordpress.com/2009/04/03/auto-bubble-bursts-march-09-auto-sales-down-40-tax-dollars-to-fund-high-risk-auto-loans/

“A rebound in pending U.S. home sales in February from a record low, as well as improving manufacturing activity, added to a growing belief the most severe global downturn in decades may be moving close to a bottom.’ What? Housing sales are up? Where? By whose count? Manufacturing activity is up? By what measure and whose numbers? I’ll provide the unvarnished numbers shortly …..

“Still, the upbeat evidence distracted investors from more sobering news the U.S. private sector continued to shed hundreds of thousands of jobs last month — a worrisome sign as investors brace for Friday’s report on nationwide job cuts.” Yes, those pesky unemployment numbers – preliminary projects announced yesterday were absolutely awful – specifics to follow.

You can imagine my surprise when 3/4 of the way through this same article the following sentence appears,

“With the economic crisis still far from over, analysts warned of more painful market volatility as the recession unfolds.”

Recession unfolds? Unfolds? One would think the recovery was underway based on the previous statements. This is beyond shoddy journalism, this is unethical reporting.  

My point is this, the data suggest we have not hit bottom, plain and simple. I’m looking forward to the “turn around” as much as the next person. I’m looking forward to it more than youmight guess. Unfortunately, that turnaround is expected to beging in 6 to 12 months and today’s data does not dignal an earlier start. Misrepresenting where we are at now can cost individuals a fortune with bad investment advise and can harm the recovery by setting false expectations that can only lead to disapointment. The truth is this; the economic elevator from hell that we are all riding, is still heading down. It’s descent may be slowing but there is no sign that it is about to stop.

I’m glad to see that stock prices are rebounding from their 12 year lows, but as unemployment continues to grow and as the prosepcts for profits and dividends remain bleak, there is more than a possibility that these gains will be surrendered and that the markets will test new all time lows. Spending, taxes and the possibility of runaway inflation remain serious concerns.

Remember this, the Stock Market is not the economy. During many of the years which made up the Great Depression (1929 – 1941) , the stock market “went up” while the economy deteriorated. In fact the DJIA went up in 6 of the 12 years of “The Great Depression”. http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm 

Wildly incorrect headlines maybe spurring people to re-enter the markets prematurely. Without a return to broad based profitability and dividend payments increased stock prices may not hold. Beware a “Bear Market Bounce” and don’t confuse “trading activity” with “investment activity”. Good Luck and lets hope for the best.

Hope aside – here are the unvarnished numbers.

Auto Sales: 

US Auto sales are down, horrifically down. The report above so badly misrepresents the true state of auto sales in the US, I have to question the author’s ethics. The numbers simply don’t support, in anyway, the statement made above. The statement above can actually be harmful. If one were to believe auto sales were on there way back, one might fight necessary change to correct “broken business models”. What do the numbers show?

Sales of new cars and trucks are down 36.8% in March 2009 compared to March 2008.

The Boston Globe reported this yesterday: “Automakers began 2008 expecting the worst year for U.S. auto sales in a decade. So far, they’re getting what they anticipated. Sales dropped by double digits in March, even for usual stalwarts like Toyota. And with fragile consumer confidence, falling home values, tightening credit and high energy prices, it may be some time before auto sales recover. http://www.boston.com/business/articles/2008/04/01/us_auto_sales_fall_in_march/

Current sales figures indicate 1,000,000 fewer cars will be sold in the US in 2009 than last year and last year was one of the worst years in memory.  http://www.boston.com/business/articles/2008/04/01/us_auto_sales_fall_in_march/ Continued sales reductions mean continued cutbacks, not growth , new jobs or new auto plants. 

Remember 1 year ago, March 2008, GM sales figures were down 19% compared to March 2007, Ford’s sales were down 14% over March 2007. http://articles.latimes.com/2008/apr/02/business/fi-carsales2  Chryslers sales were down  21.2% in March 2008 from March 2007. http://www.autoobserver.com/2008/03/march-car-sales-down-j-d-power-report-says.html .

Having a year in which year to prior year sales drop 40%, after a nearly 20% drop in the prior year, is horrific. There has been zero increase in auto sales – not a 25% increase – net auto sales are down 40%.  

The March 2009 sales drop is twice as large as the sales drop in 2008. You may be asking, what did they base these incredible claims of increased car sales on – it is this – car sales increased from February to March. The fact is Car sales always increase from February to March. Car sales last year, one of the worst years for car sales in memory, still reflected an increased number of cars sold between February and March. The important or meaningful comparison is March 2008 to March 2009 sales numbers. By that measurement sales are down by almost 40%. As to car sales, the economic elevator has not even begun to slow, it is still acelerating. To misrepresent this number does a disservice to everyone.  To claim that the data presents a picture of a recovering car market is false. Year to year sales are down 40%. In 2008 when sales were down 1/2 that amount the press described the drop as “falling of a cliff”. Now that the sales drop is twice that large, it is being reported as signs of a turnaround. GM’s sale decrease between January 2008 and Jaunuary 2009 was 49%. http://www.thetorquereport.com/2009/02/gm_sales_plunge_49_percent_for.html GM’s auto sales in February 2009 were down 53.1% from February 2008. http://www.mlive.com/business/index.ssf/2009/03/auto_sales_continued_slide_gm.html  These numbers are simply horrible. To suggest this paints a picture of a “recovery” or “turnaround” is dishonest.

Home Sales:

First, some related news, “Modified Mortgage Refinances Continue to Re-default”, “US bank regulators continue to report escalating re-default rates on mortgage loan modifications. Data being assembled by bank regulators is showing a steady trend of rising month-over-month loan work-outs falling back into delinquency within six months.” “One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-default rates increased each month and showed no signs of leveling off after six months or even eight months,” John Dugan, head of the Office of the Comptroller of the Currency, said in a statement. Defaults rose consistently across all loan types, but subprime loans understandably had the highest re-default average.” http://www.mortgageloan.com/modified-mortgage-refinances-continue-to-redefault-2743

Mortgage refinancing is up, but refinancing does not indicate an increase in home sales. Real estate investment purchasing is down 18.1% from a year prior. http://news.nationalrelocation.com/2008/03/

Last year (March 2008) existing home sales fell 19.1%. The median home price was $200,700, down 7.7% from March 2007. http://www.realtor.org/press_room/news_releases/2008/04/existing_home_sales_slip_in_march  March 2009 home sales have declined 8.6% from last year. http://www.realestateabc.com/outlook.htm The median price of a home today is $170,3000. So despite a drop in price (Value) of the medican home by $30,000,(17%) sales continue to decline year to year. The percentage decrease is smaller this year, but I’m not sure that is a signal that the elevator is slowing. As mortgage defaults or forelcosures continue and as unemployment numbers continue to worsen, I don’t know that a housing recovery can be predicted. What doesn’t need to be predicted, it can be stated, Home Sales did not incease as reported, they decreased again, from March 2008 to March 2009. The decrease was by 8.6%. Home sales were said to be at “crisis” levels in March 2008 and we have a further reduction so far this year. While there is no need to panic, these numbers so no signs of a pending recovery. Claiming that home sales increased is  a simple lie. The are down by 8.6%.

New home sales posted 331,000 seasonally adjusted annualized units in December. New home sales were off 13.9% from November’s pace and 44.8% below the pace in December 2007. http://www.garealtor.com/ConsumerInformation/LeadingEconomicIndicators/tabid/394/Default.aspx

Meanwhile US banks experienced a 149% increase in bad loans in 2008. http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

“banks face many risks in the coming months due to souring loans and investments which will impair capital through large credit writedowns. The central tenet of this site is that writedowns = reduced capital = reduced credit = reduced growth prospects.” “Loan losses for U.S. commercial banks are expected to rise to 3 percent by the end of 2010, from 1.5 percent in the third quarter of 2008, hurt by an increased percentage of bad loans, greater consumer leverage and faster problem recognition by banks”, ” Loan losses might even surpass the 3.4 percent loss levels reached in 1934 during the Great Depression as the industry has taken on increased structural risk in addition to mortgages that should become more apparent during the cyclical slowdown” http://www.creditwritedowns.com/2009/01/deutsche-bank-loan-losses-will-double-in-2009.html

Unemployment

In it’s Budget Plan the Obama Administration predicted that the recession would bottom out some time before year end 2009 or in a worse case scenario, in early in 2010. Unemployment levels were predicted to bottom out at 8.1%. This prediction was made 3 weeks ago, in early March 2009.  http://seekingalpha.com/article/124458-obama-s-unemployment-forecast-much-too-rosy . Those predictions have already proved to be overly optimistic as the February unemployment numbers (released in March) indicated that the unemployment rate had, in fact, already hit 8.1%. http://www.bls.gov/news.release/empsit.nr0.htm  An additional 651,000 jobs were lost in February 2009. Unemployment increased 1/2 a percentage point in February. Unemployment last year (February 2008) was 4.8%. Unemployment increased 60% in the 12 months between February 2008 & February 2009 . http://www.bls.gov/news.release/laus.nr0.htm

Preliminary unemployment numbers for March continue to be bleak. “There is no sign of even a temporary easing in the downward pressure on employment,”Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a client note. http://www.nydailynews.com/money/2009/03/19/2009-03-19_new_jobless_claims_fall_more_than_expect-2.html

Initial claims have topped 600,000 for seven straight weeks, a level that many economists say is consistent with another huge drop in net payrolls when the Labor Department issues its monthly employment report next month. Net job losses could top 700,000 in March, Shepherdson said, which would bring total losses to above 5 million jobs since the recession began in December 2007. http://www.nydailynews.com/money/2009/03/19/2009-03-19_new_jobless_claims_fall_more_than_expect-2.html

Unemployment for March 2009 may hit 9%. The unemployment rate in March 2008 was 5.1%. Unemployment this March is almost twice as high. http://www.bls.gov/opub/ted/2008/apr/wk1/art01.htm 

Economic Output

“Reports from the twelve Federal Reserve Districts suggest that national economic conditions deteriorated further during the reporting period of January through late February.  Ten of the twelve reports indicated weaker conditions or declines in economic activity; the exceptions were Philadelphia and Chicago, which reported that their regional economies “remained weak.”  The deterioration was broad based, with only a few sectors such as basic food production and pharmaceuticals appearing to be exceptions.  Looking ahead, contacts from various Districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010. http://www.federalreserve.gov/fomc/beigebook/2009/20090304/FullReport.htm

“US economic output slumps.” “The United States economy shrank at a rate of 3.8 per cent in the fourth financial quarter of 2008, formally plunging the country into recession, the US government has said. The figure marked a sharp drop compared to the third financial quarter, in which the growth rate fell by only 0.5 per cent, the commerce department said on Friday.” http://english.aljazeera.net/news/americas/2009/01/20091301517711306.html , http://www.cbo.gov/ftpdocs/99xx/doc9957/01-07-Outlook.pdf

World growth is projected to fall to ½ percent in 2009, its lowest rate since World War II. Despite wide-ranging policy actions, financial strains remain acute, pulling down the real economy. http://www.imf.org/external/pubs/ft/weo/2009/update/01/index.htm

Economic Report: Industrial Production: US industrial production, output at the nation’s factories, mines, and utilities, decreased a hefty 1.8% in the month of January, after falling a downwardly-revised 2.4% in December, according to the Federal Reserve. After declines in five of the last six months, production has decreased 10% in the past year, an astonishing number. The report was significantly below estimations, as economists were expecting a 1.5% decrease in output. Capacity utilization, a key gauge of inflationary pressures, fell to 72% from 73.6%. This is the lowest level since February 1983, and 9 percentage points below its average level from 1972 to 2007. Lower capacity usually leads to slower inflation, as producers compete with each other for work. http://alhambrainvestments.com/blog/2009/02/18/economic-report-industrial-production-3/

Global Business Cycle Indicators: Leading Economic Indicators declined in February. The weaknesses among the leading indicators have remained widespread in recent months. http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1

National Economic Update: “Recently released data indicate that the economic contraction has intensified at a pace associated with severe recessions. Two consecutive quarters of negative real growth, striking job losses and deep declines in both manufacturing and services output defined year-end 2008. While the economic outlook remains bleak for the first half of 2009, a few indicators suggest that the pace of contraction may slow in coming months.” http://dallasfed.org/research/update-us/2009/0901.cfm The rate of contraction “maybe” slowing in the months ahead – not that the descent on the economic elevator to hell is slowing at this time. 

Durable Good Orders Drop: Durable good orders also painted a grim outlook. “Demand for U.S.-made durable goods fell for the sixth straight month in January.  Orders for durable goods  such as PC’s,  planes,  and washing machines fell 5.2% in January. Orders fell in every major sector”. http://www.chartingstocks.net/2009/02/jobless-claims-jump-durable-good-orders-drop/ After a small uptick  in February early indications for March are not good. For both the Philly and New York Fed manufacturing reports, the new orders index fell in both February and March. Both surveys have data for a given reference month that overlaps two actual months (the March report includes data from both late February and early March). http://gain.econoday.com/byshoweventfull.asp?fid=437975&cust=gain

The datum does not suggest the recovery has started, but the descent into hell maybe slowing. We are still descending, but not as quickly. Lets hope the policies being implement are the correct ones and we don’t suddenly accelerate into oblivion. I, for one, doubt that we can spend our way out of recession or borrow our way out of debt.

Hard & Straight Talk About The Auto Bailouts – Did Obama Just Start The Bankruptcy Reorganization

General Motors and Chrysler are Bankrupt. Plain and simple.

“Bankrupt: any insolvent debtor; a person unable to satisfy any just claims made upon him or her.”

General Motors and Chrysler fit the defintion perfectly.

Absent the unbelieveable Political Theater of the day both Chrysler and GM would have been directed into Chapter 11 reorganization 6 months ago and both companies would be on their way to a rebirth by now. The worst would be over, better days ahead. What has the billions of dollars in taxpayer money bought us – a dealy in the inevitable.  

GM and Chrysler are, despite any claims to the contrary, on their way to the bankruptcy court house now.

Whether it is by the politically created names of “surgical bankruptcy” http://www.detnews.com/apps/pbcs.dll/article?AID=/20090330/AUTO01/903300393/1148/rss25  or “prepackaged bankruptcy” http://www.bloomberg.com/apps/news?pid=20601087&sid=aRfqFMhlj5lk&refer=worldwide it is bankruptcy non the less. GM and Chrysler cannot pay their own operating expenses nor can they pay their parts suppliers. They are bankrupt and have been bankrupt since some time early last year. http://money.cnn.com/2009/03/19/news/companies/auto_parts_bailout/index.htm?postversion=2009031919

GM and Chrysler are continuing to receive  bailout money to this day. GM will continue to receive “operating capital” for the next 60 days while Chrysler will receive it for thre next 30 days. For some reason the Obama Admministration refuses to dislcose the exact amount of money involved. Last November GM was burning through $24 Million US dollars a day in cash – The Main Stream Media has incorrectly reported that Washington said no more cash – What Washington actually said was this, “GM, you’ve got 60 days worth of additional cash- Chrysler you have 30 days cash. Why hasn’t anyone asked why Chrysler only received 30 days cash?

The terms “prepackaged” and “surgical” do not appear in the bankruptcy code – the terms are the creation of Politicians who simply do not want to admit that they were wrong, that Bankruptcy was the correct thing to do all along. Bankruptcy does not mean that GM or Chrysler will disappear. They will not. Contracts and business models will be “restructured” and the Companies will attempt to return to viability (profitability) once again.

Bankruptcy is not going to cause a negative impact on the economy. Bankrutcy does not create conditions which do not already exist. Bankruptcy is the end result – not the cause.

GM’s latest round of employee reductions from 62,400 hourly employees in North America to 54, 900 employees http://news.yahoo.com/s/ap/20090326/ap_on_bi_ge/gm_buyouts   will continue, not because of a Bankruptcy but because of the financial condition of GM demands that GM have a smaller work force. GM was and is “not a viable” business concern because it is operating under a “business plan” that prevents it from making a profit. In the 4th Quarter of 2007 GM lost 39 Billion Dollars. The 4th Quarter of 2007, long before the economic down turn hit home. http://www.usatoday.com/money/autos/2009-03-05-gm-auditors-statement_N.htm GM’s current downsizing began in 2005. http://money.cnn.com/2005/11/21/news/fortune500/gm_cuts/.fortune/index.htm?postversion=2009031112  http://articles.latimes.com/2007/jan/06/business/fi-gm6   http://money.cnn.com/2008/11/11/news/companies/GM/index.htm    

2005 was 4 years ago – and the problems didn’t start then.         

GM’s current problems are not the focus of this post. (See Post From Nov 2008 https://mcauleysworld.wordpress.com/2008/11/11/why-we-shouldnt-bailout-the-detroit-3-370000-per-employee-bailout/)

What happens next is.

1st: Gettlefinger has to go.

The UAW has not been truthful to its members. Listen to them when they appear on TV. Unfair trade from abroad (don’t look now – half the US auto industry is copmposed of “transplants” Honda, Toyota, Hundai, etc – built in America, by American Workers – and those workers actually earn more than their UAW counter parts http://www.aftermarketnews.com/Item/28594/uaw_losing_pay_edge_foreign_automakers_%20bonuses_boost_wages_in_us_plants_as_detroit_car_companies_struggle.aspx) – https://mcauleysworld.wordpress.com/2008/11/17/stop-the-auto-industry-bailout-pay-offs-to-the-detroit-3-at-expense-of-taxpayers/   The transplants now directly employ 150,000 US workers – GM employes 54,000 with additional subtractions to come. http://www.msnbc.msn.com/id/24947044 )

The next most frequently heard excuses – it was NAFTA or the economy went bad. GM & Chrysler went bad long before the economy slowed – one year ago the UAW refused to acknowledge the worsening economy and went on strike – closing 29 GM plants –  http://blog.mlive.com/autoblog/2008/03/american_axle_strike_hobbling.html , http://seekingalpha.com/article/67124-american-axle-strike-unions-continue-to-kill-u-s-manufacturing . In 2007 the UAW shut down GM with a strike. http://money.cnn.com/2007/09/25/news/companies/gm_uaw/index.htm  The UAW leadership has created a delusional membership.

The fact that GM ruled the auto industry 50 years ago is completely immaterial to today’s market place. GM and the GM worker of today bare no resemblance to their Grandfathers of the 40’s – The GM and the GM worker that helped win WWII are only a foot note in history – one of the most distingiunshed footnotes of this Country’s history – but the modern GM and its workers should be embarassed to make this self serving comparison. Can you imagine any GM employee in that post World War II era claiming they couldn’t compete with anyone for any reason …..   

2nd GM needs to continuing downsizing. Depsite the massive cuts todate, GM needs to be a company half its current size. GM has known this for years. The UAW leadership has known this also. Poltically it is something the UAW leadership has choosen not to acknowledge – failing to do so has weakened GM and the labor market where it’s membership must compete.    

3rd – GM needs to downsize its dealership network and supplier chain accordingly. http://blogs.motortrend.com/6295283/editorial/rightsizing-gm-the-number-that-counts/index.html  http://seekingalpha.com/article/112598-the-arduous-sometimes-impossible-task-of-closing-down-car-dealerships , http://www.autoremarketing.com/ar/news/story.html?id=9062 , http:www.autonews.com/article/20080922/ANA06/809220374/1178 , http://www.cbsnews.com/stories/2006/02/10/ap/business/mainD8FMI6AG2.shtml

4th – GM’s new product line must hit the mark. The greatest fear for GM should be that the Government will now mandate the production of autos that the American Public does not want to buy. The impact of the “Green Agenda” on the US Auto Industry is a topic for a different post – https://mcauleysworld.wordpress.com/2008/11/07/obama-granholm-pelosi-waxman-dingell-the-death-of-american-automobile-manufacturing/

As to Chrysler and the 30 days it has to complete restructuring and to find a partner. Beware of Audi. The Main Stream Media and Political Shysters like Michigan Governor Granholm have over hyped Audi’s potential as a savior. Granholm believed the Obama Administration would pour $100’s of billions into her state – incorrectly. Chrysler needs to continue it’s desperate hunt for a partner. Don’t put all of your eggs in the Audi basket ….

Fiat-Chrysler Link Is Nice Idea, but Futile Without Money : Fiat S.p.A.’s acquisition of 35 percent of Chrysler has all the good-sounding trappings of an auto-industry alliance that, under normal circumstances, would indicate another industry tie-up that might bear fruit. The terms of the alliance, as presented, bring from Fiat no capital that could be used to shore up Chrysler’s foundering day-to-day operational outlook. While an arrangement that might — comparatively quickly — lead to new models for gaps in Chrysler’s product range and increased utilization for some of its manufacturing plants is a solid strategic step, it’s not a tactical solution to the overriding predicament: Chrysler needs cash and needs it now. http://www.autoobserver.com/2009/01/commentary-fiat-chrysler-link-is-nice-idea-but-futile-without-money.html

Chrysler’s Italian Job on the American People : 

Is there any doubt that when government starts to tinker with industry all sorts of nutty things come to pass? How about the proposed “global strategic alliance” between Chrysler and Fiat? Apparently, there is only one way to make Chrysler competitive with foreign car makers in the U.S.. And that is to have U.S. taxpayers put up $7 billion to essentially fund another foreign car maker’s takeover of Chrysler. This swindle isn’t just pazzo–it is plain wrong. Hopefully, it will be killed before it ever makes it to Congress. The alliance is contingent on $3 billion in additional U.S. government loans to Chrysler. “The alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding Chrysler in the future.” http://blogs.wsj.com/deals/2009/01/21/mean-street-chryslers-italian-job-on-the-american-people/?mod=msn_money_ticker

The last thing America needs is for Fiat to suck the remaining life out of Chrysler, along with wheelbarrows of taxpayer cash, and take both back to Italy. 

A straught out bankruptcy reorganization maybe a much better option. The sale of Chrsyler’s parts, Jeep, Dodge and Chrysler would leave three smaller, nimbler and more easily managed businesses. Given additional cost reductions, three such companies could be in a position to succeed in the years to come. 

As to the UAW Members – quick blaming the transplants for your woes. Your fellow American citizens are competing head up. If automakers in Detroit at at a disadvantage why don’t you look to the leadership in your state. The Federal taxs laws apply uniformly to all companies, regardless of which state they are loacted in. Why don’t you research how Michigan’s Property Tax, Business Income Tax, Use Taxes, Sales Taxes, Gasoline Taxes and various City Taxes impact the price of your product. Quit blaming Washington – The problem is and has been much closer to home. 

US labor costs are $800 higher per car then their Japanesse counterparts – yet US autos sell for an average of $2,500 less then the comparable Foreign competitor. “So the loss of U.S. market share must be due to consumers’ perception that U.S. vehicles have much lower quality than Japanese ones. Even the lower prices for U.S. vehicles are not enough to convince U.S. consumers to switch from Japanese to U.S. models.” http://www.bloggingstocks.com/2008/12/10/do-uaw-workers-make-73-an-hour-does-it-matter/

There is the problem. A problem Government bailouts can’t help.

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