Archive for the ‘GM’ Category

Mitt Romney Says: Let Detroit Go Bankrupt

November 19, 2008

IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.

Published by The New York Times
November 19, 2008

I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit’s automakers.

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.

Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.

Read the rest:
http://www.nytimes.com/2008/11/19/opinion/
19romney.html?_r=1&hp

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Detroit’s Auto Industry, Failure’s a Done Deal

November 18, 2008

“Nothing,” said a General Motors spokesman last week, “has changed relative to the GM board’s support for the GM management team during this historically difficult economic period for the U.S. auto industry.” Nothing? Not even the evaporation of almost all shareholder value?

By George F. Will
The Washington Post
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GM’s statement comes as the mendicant company is threatening to collapse and make a mess unless Washington, which has already voted $25 billion for GM, Ford and Chrysler, provides up to $50 billion more — the last subsidy until the next one. The statement uses the 11 words after “team” to suggest that the company’s parlous condition has been caused by events since mid-September. That is as ludicrous as the mantra that GM is “too big to fail.” It has failed; the question is what to do about that.

The answer? Do nothing that will delay bankrupt companies from filing for bankruptcy protection….

Read the rest:
http://www.washingtonpost.com/w
p-dyn/content/article/2008/11/17
/AR2008111703101.html?hpid=opi
nionsbox1

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By Martin Feldstein
The Washington Post
Tuesday, November 18, 2008; Page A27

The Big Three U.S. automakers need more than an injection of $25 billion from the federal government. Because of their ongoing losses, they would burn through that money in less than a year and would soon be back for more.

General Motors, Ford and Chrysler can make excellent cars, but they cannot sell them at prices that are competitive with the prices of cars produced in the United States by Toyota and others or with the prices of cars imported from Europe and Asia. The basic reason is the labor costs imposed by union contracts.

The Big Three pay much higher wages than production workers are paid in the nonunion auto firms and in the general economy. And the health-care costs of current workers and retired union members are an enormous additional burden.

The simplest solution is to allow GM and the others to file for bankruptcy. If the companies file under Chapter 11, they would be able to continue producing cars, and the workforce would remain employed while the firms reorganized. The firms would also be able to get short-term credit under bankruptcy protection.

The bankruptcy court could require the unions to rewrite contracts, bringing wages down to levels that would allow the firms to compete and therefore to maintain employment. Scaling back employee and retiree health benefits would further improve price competitiveness and allow better cash wages. The firms’ bondholders and other creditors would have to take losses. Shareholders’ fate would depend on how firms responded to this restructuring.

Read the rest:
http://www.washingtonpost.com/w
p-dyn/content/article/2008/11/1
7/AR2008111702917.html?hpid=
opinionsbox1

Obama-Pelosi Stimulus May Fail to Reignite Economy

November 17, 2008

President-elect Barack Obama and House Speaker Nancy Pelosi may throw as much as half a trillion dollars worth of stimulus at the economy — and have little or no growth to show for it.

The forces arrayed against recovery, including the credit contraction and cutbacks by consumers, are so powerful that they may overwhelm the record sums of spending and tax cuts being discussed in Washington. The only consolation, economists say, is that without the stimulus, things would be even worse.

By Rich Miller, Bloomberg

Speaker of the House Nancy Pelosi speaks during a news conference ...
Speaker of the House Nancy Pelosi speaks during a news conference on Capitol Hill.  Democrats in Congress Monday launched a new multi-billion dollar drive to save the US auto industry, but the White House warned against draining funds from a huge finance industry bailout.(AFP/Getty Images/File/Brendan Smialowski)

“It’s hard for me to imagine we’ll have a return to positive growth before the fourth quarter of 2009, even with a $500 billion stimulus,” says Barry Eichengreen, an economics professor at the University of California, Berkeley. He sees the unemployment rate rising to 9.5 percent in early 2010, from 6.5 percent now.

The first dose of fiscal medicine might come within weeks, following the return of Congress today for a lame-duck session, and would focus on stepped-up government spending. The balance, including a tax rebate, would come after Obama assumes the presidency in January.

Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania, says the economy may contract 2 percent next year without a package of at least $300 billion. With it, “we could get growth pretty close to zero,” he adds. That would still be the worst result since 1991.

A `Bolder’ Approach

“The breadth and potential depth” of the crisis call for a “bolder” approach, Obama economic adviser Gene Sperling said in congressional testimony Nov. 13. A package costing $300 billion to $400 billion “should be the starting point….

Read the rest:
http://news.yahoo.com/s/bloomberg/20081117/pl_bloomberg/aez
5fruymj4q;_ylt=Ak9FS0yn8CqAZ9eabFQuVA2s0NUE

Japan Slides Into Recession; Obama Presidency Seen as No Help

November 17, 2008

Japan’s economy slid into a recession for the first time since 2001, the government said Monday, as companies sharply cut back on spending in the third quarter amid the unfolding global financial crisis.

The world’s second-largest economy contracted at an annual pace of 0.4 percent in the July-September period after a declining an annualized 3.7 percent in the second quarter. That means Japan, along with the 15-nation euro-zone, is now technically in a recession, defined as two straight quarters of contraction.

The result was worse than expected. Economists surveyed by Kyodo News agency had predicted gross domestic product would gain an annualized 0.1 percent.

Japan’s Economy Minister Kaoru Yosano said following the data’s release that “the economy is in a recessionary phase.”

But the worst may be yet to come, especially with dramatic declines in demand from consumers overseas for Japan’s autos and electronics gadgets. Hurt also by a strengthening yen, a growing number of exporters big and small are slashing their profit, sales and spending projections for the full fiscal year through March.

Toyota Motor Corp., for example, has cut net profit full-year profit forecast to 550 billion yen ($5.5 billion) — about a third of last year’s earnings. And Sony Corp., whose July-September profit plunged 72 percent, expects to make 59 percent less this fiscal year than last year.

“What we’re starting to see is the extent of deterioration in external demand start to weigh more heavily on the Japanese economy,” said Glen Maguire, chief Asia economist at Societe Generale. “And I think looking forward, there’s every indication that dynamic is going to continue.”

Read the rest:
http://news.yahoo.com/s/ap/20081117/ap_on_bi_ge/as_jap
an_economy;_ylt=ApHIyzOiyEFeB_wFtelfrris0NUE

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For Japan, Obama Signals A Shift Closer to China, Away From “Traditional” Asian Allies
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The Japanese do not share the jubilation seen almost everywhere following the election of Barack Obama. 

Economically, Japan sees an Obama White House funding the American Big Three Automakers: GM, Chrysler and Ford.  And that’s bad for Japan’s automakers.

Japan, for one nation, prefers to allow the “system” to work without more government intervention.

On the foreign policy level, Japan fears North Korea’s erratic behavior and nuclear capability.  It also fears China as a tradition enemy of immense wealth, population and size which can easily overwhelm the economy of Japan.

Japan fears the presidency of Barack Obama.  “So far, no good,” one senior diplomat told Peace and Freedom.

John E. Carey
Wakefield Chapal, Virginia

Related:
Obama Not Such A Hero In Japan

Top Republican senators oppose automaker bailout

November 16, 2008

Top Republican senators said Sunday they will oppose a Democratic plan to bail out Detroit automakers, calling the U.S. industry a “dinosaur” whose “day of reckoning” is coming. Their opposition raises serious doubts about whether the plan will pass in this week’s postelection session.

Democratic leaders want to use $25 billion of the $700 billion financial industry bailout to help General Motors Corp., Ford Motor Co. and Chrysler LLC.

By Stephen Ohlemacher, Associated Press Writer

Sens. Richard Shelby of Alabama and Jon Kyl of Arizona said it would be a mistake to use any of the Wall Street rescue money to prop up the automakers. They said an auto bailout would only postpone the industry’s demise.
Richard Shelby
Senator Shelby

“Companies fail every day and others take their place. I think this is a road we should not go down,” said Shelby, the senior Republican on the Senate Banking, Housing and Urban Affairs Committee.

General Motors headquarters is seen October 26, 2008 in Detroit, ... 
General Motors headquarters is seen October 26, 2008 in Detroit, Michigan. Picture taken October 26, 2008.(Rebecca Cook/Reuters)

“They’re not building the right products,” he said. “They’ve got good workers but I don’t believe they’ve got good management. They don’t innovate. They’re a dinosaur in a sense.”

Added Kyl, the Senate’s second-ranking Republican: “Just giving them $25 billion doesn’t change anything. It just puts off for six months or so the day of reckoning.”

House Speaker Nancy Pelosi, D-Calif., said over the weekend that the House would provide aid to the ailing industry, though she did not put a price on her plan.

“The House is ready to do it,” said Democratic Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee. “There’s no downside to trying.”
Rep. Barney Frank, Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi and Sen. Christopher J. Dodd were among the congressional Democrats negotiating the bailout settlement on Sunday. (Joseph Silverman/The Washington Times)

Above: Ready to bail, from L to R: Rep. Barney Frank, Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi and Sen. Christopher J. Dodd. Photo by Joseph Silverman

Read the rest:
http://news.yahoo.com/s/ap/20081116/ap_on_go
_co/auto_bailout;_ylt=AmAt77VLR57r0Uq41kBoeYWs0NUE

GM failure: The shockwave

November 14, 2008

If General Motors really does run out of money by the end of the year, as it predicted was possible, the impact would be felt far and wide – to hundreds of suppliers, rival automakers and ultimately dealers across the nation.

“Once the first domino falls, it rapidly takes out all the other dominoes,” said Dennis Virag, president of the Automotive Consulting Group.

Suppliers would be among the first to feel those effects since GM only manufactures the body, the engine and the transmission used in its cars.

In the United States alone, GM spends $31 billion on parts from 2,100 different suppliers. These include the “direct suppliers” involved in producing a vehicle – those that provide everything from steering wheels and seatbelts to brakes and airbags – as well as “indirect suppliers” – those that make things such as gloves, protective eyewear, shop rags and lightbulbs.

By Peter Valdes-Dapena, CNNMoney.com senior writer

Read the rest:
http://money.cnn.com/2008/11/14/autos/auto_failure_
ripple_effect/index.htm?postversion=2008111412

Auto Maker Bailout “Doubtful”

November 14, 2008

A senior Democratic senator raised doubts on Thursday that an attempt to bail out U.S. automakers had enough support to clear Congress this year. 

As Republicans amplified their concerns about a bailout, Senate Banking Committee Chairman Christopher Dodd raised the biggest red flag for fellow Democrats trying to craft a $25 billion rescue and pass it during a post-election session set to start next week.
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By John Crawley and Rachelle Younglai, Reuters 

“Right now, I don’t think there are the votes,” Dodd of Connecticut told reporters about prospects in the Senate. “I want to be careful of bringing up a proposition that might fail,” he said.

Although Dodd said “we ought to do something” and personally backed using money from the ongoing $700 billion financial services rescue program to help Detroit, he was skeptical that enough Republicans would support a bailout.

Senate Majority Leader Harry Reid, a Nevada Democrat, also cautioned that success of a bailout rests with Senate Republicans and the White House. With their slim majority, Democrats cannot force a measure through the Senate or trump a White House veto.

The White House opposes the approach being taken by congressional Democrats but has not threatened to block any bailout. Bush administration officials have said they would consider other steps Congress can take to help General Motors Corp, Ford Motor Co and Chrysler LLC.

Dodd said there have been “legitimate issues raised” about how to help.

Read the rest:
http://www.reuters.com/article/marketsNews/idINN1339
368420081114?rpc=44

Chances Dwindle on Bailout Plan for Automakers

November 14, 2008

The prospects of a government rescue for the foundering American automakers dwindled Thursday as Democratic Congressional leaders conceded that they would face potentially insurmountable Republican opposition during a lame-duck session next week.

By David M. Herszenhorn  
The New York Times
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At the same time, hope among many Democrats on Capitol Hill for an aggressive economic stimulus measure all but evaporated. Democratic leaders have been calling for a package that would include help for the auto companies as well as new spending on public works projects, an extension of jobless benefits, increased food stamps and aid to states for rising Medicaid expenses.

But while Democrats said the stimulus measure would wait until President-elect Barack Obama takes office in January, some industry experts fear that one of the Big Three automakers will collapse before then, with potentially devastating consequences.

Despite hardening opposition at the White House and among Republicans on Capitol Hill, the Democrats said they would press ahead with efforts to provide $25 billion in emergency aid for the automakers. But they said the bill would need to be approved first in the Senate, which some Democrats said was highly unlikely.

Read the rest:
http://www.nytimes.com/2008/11/14/business/
14auto.html?_r=1&hp=&adxnnl=1&oref=slogin&a
dxnnlx=1226649694-VV22vNLQxrIE1qxIf8tqEQ

A Lemon of a Bailout

November 14, 2008

When you get gemons, “make lemonaide” the saying goes.  But when spending taxpayer billions for a fiscal and economic recovery plan or “bailout” that almost nobody likes, a lemon can get in the way….

By Charles Krauthammer
The Washington Post
Friday, November 14, 2008; Page A19

Finally, the outlines of a coherent debate on the federal bailout. This comes as welcome relief from a campaign season that gave us the House Republicans’ know-nothing rejectionism, John McCain‘s mindless railing against “greed and corruption,” and Barack Obama‘s detached enunciation of vacuous bailout “principles” that allowed him to be all things to all people.

Now clarity is emerging. The fault line is the auto industry bailout. The Democrats are pushing hard for it. The White House is resisting.

Underlying the policy differences is a philosophical divide. The Bush administration sees the $700 billion rescue as an emergency measure to save the financial sector on the grounds that finance is a utility. No government would let the electric companies go under and leave the country without power. By the same token, government must save the financial sector lest credit dry up and strangle the rest of the economy.

Treasury Secretary Henry Paulson is willing to stretch the meaning of “bank” by extending protection to such entities as American Express. But fundamentally, he sees government as saving institutions that deal in money, not other stuff.

Democrats have a larger canvas, with government intervening in other sectors of the economy to prevent the cascade effect of mass unemployment leading to more mortgage defaults and business failures (as consumer spending plummets), in turn dragging down more businesses and financial institutions, producing more unemployment, etc. — the death spiral of the 1930s.

Read the rest:
 http://www.washingtonpost.com/w
p-dyn/content/article/2008/11/13
/AR2008111303348.html?hpid=opinionsbox1

Vietnam to grow genetically modified crops

November 13, 2008

Vietnam plans to test genetically modified (GM) agricultural crops from now until 2010 and then grow them on a large scale, media reports in the communist country said on Thursday.

Agriculture Minister Cao Duc Phat announced the plan in a National Assembly session this week, said the state-run Vietnam News Agency.

AFP

Agriculture Minister Cao Duc Phat talks to media in 2006. Vietnam ... 
Agriculture Minister Cao Duc Phat talks to media in 2006. Vietnam plans to test genetically modified (GM) agricultural crops from now until 2010 and then grow them on a large scale, media reports in the communist country said on Thursday.(AFP/File/Hoang Dinh Nam)

Under the government plan, Vietnam would from 2011 plant GM species of maize, cotton and soybean, said the news site Vietnamnet quoting experts attending a recent biotechnology workshop.

The Ho Chi Minh City Biotechnology Centre plans to grow a GM maize variety from the Philippines on a trial basis, the report said.

GM technology has been highly controversial, praised by some for increasing yields and improving varieties, and condemned by others for creating “frankenfoods” that pose dangers to the environment and people’s health.

Read the rest:
http://news.yahoo.com/s/afp/20081113/sc_afp/vietnambio
techagriculturegm_081113171333