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To: stockman_scott who wrote (383)9/12/2011 2:45:28 PM
From: Glenn Petersen
   of 431
Detroit Sets Its Future on a Foundation of Two-Tier Wages

New York Times
September 12, 2011

DETROIT — They are a cornerstone of Chrysler’s unlikely comeback: 900 employees turning out a Jeep Grand Cherokee S.U.V. every 48 seconds of the working day at an assembly plant here.

Nothing distinguishes them from the other workers at the Jefferson North plant, except their paychecks.

The newest Chrysler workers earn about $14 an hour, compared with double that amount for longtime employees on the same shift. With the economy slumping and job creation once again a pressing issue in the White House and Congress, the advent of a two-tier wage system in Detroit is spiking employment for one of the country’s most important manufacturing industries.

For many, the opportunity for steady employment is welcome, even at a lower wage.

“Everybody is appreciative of a job and glad to be working,” said Derrick Chatman, who makes $14.65 an hour putting tires on Jeeps after being laid off at Home Depot, working odd construction jobs and collecting unemployment.

What was once seen as a desperate move to prop up the struggling auto industry is now considered an integral part of its future. The demand for $14-an-hour manufacturing jobs is providing Detroit’s Big Three automakers with a ready pool of eager new employees. Last year, Chrysler was flooded with inquiries about the jobs here, and it froze the list after receiving 10,000 applications.

The companies say the two-tier wages are paying off. Despite the disparity, there is no appreciable difference in the Grand Cherokees produced on the shift dominated since last fall by the lower-paid workers, the plant manager says. At General Motors, the savings from its two-tier workers are crucial to production that began last month of an inexpensive, subcompact car, the Chevrolet Sonic, in suburban Detroit.

Two-tier wage systems have been tried in the airline industry and others with spotty success. Usually the lower wages disappear rather quickly when the economy picks up. But the arrival of vastly different wage rates in auto factories is a seminal event in an industry long influenced by a powerful union devoted to equal pay regardless of seniority.

The new jobs, which are seen as long term, are being watched closely by economists, executives in other industries and Washington policy makers eager to increase employment in manufacturing and other areas.

“This is not going away,” said Kristin Dziczek, a labor analyst at the Center for Automotive Research in Ann Arbor, Mich., a research organization. “It has allowed the Big Three to reduce labor costs without cutting the pay of incumbent workers. Is it good for the health and competitiveness of the companies? Yes. And is that good for job security? Yes.”

Four years ago, the United Automobile Workers agreed to allow Chrysler, G.M. and Ford to pay lower wages to new hires to help close the cost gap with foreign carmakers. Now the two-tier arrangement is at the forefront of labor talks between the U.A.W. and the Detroit companies.

The union’s president, Bob King, has made an increase in entry-level wages a top priority in negotiations for a new national contract to replace the current agreement, which expires on Wednesday.

So far, about 12 percent of Chrysler’s 23,000 union workers earn the lower wage, and over all, 4,000 or so of the 112,000 U.A.W. members are second-tier hires. Those numbers are expected to grow — and in fact can increase significantly even under the current contract. The jobs are central to the contract talks now because they are viewed as a critical element of the industry’s continued recovery.

The benefits for the lower-tier workers are scaled back as well. They get a maximum of four weeks paid time off a year, versus five for the longtime workers. And instead of the guaranteed $3,100-a-month pension a full-paid worker receives after age 60, the new hires have to build their own “personal retirement plan” based on contributions from the company of less than $2,000 a year.

The gap in wages between regular and entry-level workers has created some dissent in the U.A.W.’s ranks. Some long-term employees have demonstrated against the two-tier system and called for it to be abolished. Mr. King, however, has focused on getting meaningful pay raises for the lower tier rather than eliminating it.

At the big Labor Day parade in Detroit, union activists chanted “equal pay for equal work,” and some full-paid workers said they were willing to forgo a wage increase in the new contract to help the lower-tier employees.

“In order to get those guys up, we’ll take a signing bonus or profit-sharing instead,” said Gary Wurtz, a line worker at G.M.’s plant in Orion Township, Mich., where 40 percent of the employees are lower tier.

There were some early problems with turnover among new hires who could not keep up with the intense pace of assembly-line work, according to Pat Walsh, the manager at Chrysler’s plant here. But the workers who stayed have performed well. “Our quality numbers have been very good,” Mr. Walsh said. “And our data doesn’t show any differences per shift or per workstation.”

Workers at Jefferson North said that the pay gap had not created visible tension. Rather, they say the older workers have encouraged the new hires to hang tough in hopes of achieving full-wage status down the road.

“They’re just telling us to hold out and that everything is going to get better,” said Mr. Chatman, the tire room worker.

Mr. Chatman, who is 44 and single, said the security of the job, which includes the union’s traditional medical benefits, is paramount to him. But he does not hide the fact that he expects one day to make as much money as his top-wage counterparts.

“I think they should get rid of the two tiers,” he said. “I hope it’s not here to stay. I hope it was just a steppingstone to get things back going again at Chrysler.”

There is no hard timetable for the lower-paid workers to move up to full-wage status, but it could take years. As part of the government’s bailout of G.M. and Chrysler, the union agreed that no second-tier worker can move up until 2015 at the earliest. At Ford, which did not receive federal aid, the current U.A.W. contract allows the company to fill 20 percent of its union jobs with lower-paid workers before it moves any into the top tier.

Experts on two-tier arrangements say that advancement opportunities are critical to the system’s success.

“If you know you’re going to get to the top wage eventually, the system can work,” said Peter Cappelli, a professor at the Wharton School at the University of Pennsylvania. “The big problem is when you think you’ll never get there.”

For now, employees like Mr. Chatman are exhilarated by their steady paychecks and the emotional reward of being part of Chrysler’s turnaround. He was recently promoted to be a team leader in the plant, which involves facilitating the efforts of 10 other employees, including two full-wage workers (no additional pay).

He can’t help smiling every time he sees each shiny new Grand Cherokee, one of Chrysler’s top-selling models, roll off the line. Still, it’s tough to accept that his entire annual salary of about $30,000 is not enough to afford the least expensive Jeep made at Jefferson North.

“It would be a shame to work at Chrysler,” he said, “and not be able to drive a Chrysler.”

Nick Bunkley contributed reporting.

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To: Glenn Petersen who wrote (395)9/20/2011 8:15:17 PM
From: stockman_scott
   of 431
Detroit's big crash and bigger resurrection

September 19, 2011: 1:35 PM ET

FORTUNE -- It's easy to think Detroit's automakers -- at least General Motors and Chrysler -- were just too inept to avoid bankruptcy. They couldn't screw together a popular small car if their jobs relied on it, and they came up lame fighting skyrocketing costs like health care. But author Bill Vlasic shows us Detroit's Big Three weren't nearly as dumb as Americans made them out to be. Early in his insider tale of Detroit's crash and eventual resurrection, Once Upon a Car, Vlasic details how almost everyone in the Motor City knew they needed to change before a crisis pushed them to the brink. But executives at GM, Chrysler -- and to a lesser extent Ford -- were too hamstrung by decades of bureaucracy and mismanagement. Only Ford, it turned out, could reverse course fast enough to avoid bankruptcy before the economy sank. Vlasic, a veteran auto reporter and Detroit bureau chief for The New York Times, tells a riveting story. He takes us into deep into GM's board meetings in 2006 when directors ignore ominous trends in favor of incremental course. He introduces characters like Jim Farley (cousin of the late comedian Chris Farley) who reviled Detroit's carmakers while working at Toyota ( TM) but eventually decided that helping Ford was part of his duty to his late grandfather, who went to work for Ford in 1914, and his twin infants who died after premature births.

Even with all the ink spilled on Detroit lately, Vlasic's tale is as fresh as a new car. Details from inside GM ( GM) board meetings might be the most enraging to taxpayers who ultimately bailed out the auto giant. As chairman and CEO, Rick Wagoner wielded outsized control over the board, and his political maneuvering squashed a potential partnership with Renault-Nissan, one that may have saved GM from filing the largest bankruptcy in U.S. history.

In fact, you walk away from the book wondering if a simple management shakeup -- separating the titles of chairman and CEO -- would have created a board strong enough to save GM. It seemed to work at Ford ( F). In 2005, Bill Ford, great-grandson of founder Henry Ford, understood he couldn't turn around his family's company alone. He recruited Alan Mulally as CEO, relinquished that title, and remained as chairman. Vlasic's reporting makes it clear that two heads at Ford were better than one at GM.

Chrysler isn't forgotten. We learn that the Germans at Daimler were itching to dump their American arm for months before saying so publicly. In the end, Vlasic shows, Chrysler didn't have a chance to avoid bankruptcy. Daimler had starved it of R&D in the merger's waning years. Even the Wall Street hotshots at Cerberus, who bought Chrysler in 2007, were surprised at how hollow the automaker was.

Vlasic says he wanted to write a fast-paced narrative, and he's penned a page-turner in Once Upon a Car. You dart from inside GM's tense boardroom meetings to the turnaround at Ford's Glass House headquarters, to the halls of Congress, where Wagoner, enduring lawmakers' hostile bailout questions, is waiting to sprint to the restroom after drinking too much coffee.

The book doesn't forget the hundreds of thousands of workers whose livelihoods were at stake. Vlasic interviews middle-class autoworkers across the country who consider themselves the last of a breed. Union head Ron Gettelfinger isn't free of blame. He overplays his hand with Chrysler during key health plan discussions and defends the union's infamous jobs bank.

Fortune makes an appearance when Carol Loomis's 2006 article predicting GM bankruptcy disappoints the company. Executive Bob Lutz is incredulous at outsiders for not understanding GM's turnaround plan. We "told her why we're not going bankrupt," he says of the Fortune senior-editor-at-large. "And she goes and writes that story anyway."

That anecdote says a lot about Detroit: The automakers saw trouble ahead, but two of the three couldn't shift fast enough to avoid it.

Fortune spoke with Vlasic before the book's publication to hear about the reporting and his thoughts on the future of Detroit.

Q. A lot of books have come out about the automakers. What were you tying to do differently?

A. I wanted to do a narrative. I wanted a turn-the-page, you-are-there book -- one where you get to know what really happened and how these executives behaved under such incredible pressure. Hopefully people understand how dire this situation became and how close this industry was to going out of business.

What was most surprising thing you learned?

I didn't know how dysfunctional General Motors really was at the top -- and Ford for that matter, too. I think the perspectives on GM and some of the players will change after they read this. I don't know if anybody comes off looking more positive than they would otherwise.

At the end of the book Jim Farley, the Ford executive, says "Fuck GM. I hate them." Is competition back in Detroit?

It's very interesting to watch them when they are making money. That quote by Farley got a lot of attention. But he's by no means the only one to express that sentiment within Ford. There's something about the GM arrogance and fact that they were not only bailed out by the U.S. government, but they were funded like no car company in Detroit has ever been funded. They had $30 billion in [bailout money] in the bank.

One of the larger things that happened was the Big Three broke apart forever. The day that Ford decided not to go back to Congress and ask for money, Ford went down one path, and GM and Chrysler went down another. That's healthy for the industry. A lot of the negotiating they used to do together brought them all down.

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To: stockman_scott who wrote (396)10/1/2011 7:33:51 PM
From: Glenn Petersen
1 Recommendation   of 431
On the Road to Detroit’s Big Pileup

If General Motors were any other company, it would probably be dead by now. In the summer of 2008, nearly a year before G.M. filed for bankruptcy, its executives were growing desperate. Rick Wagoner, its chief executive, secretly proposed a merger with Ford, while Bill Ford courted the future president, Barack Obama, in an attempt to safeguard his company. This article is adapted from “Once Upon a Car: The Fall and Resurrection of America’s Big Three Automakers — G.M., Ford and Chrysler” by Bill Vlasic, the Detroit bureau chief of The New York Times. The book, to be published Tuesday by William Morrow, reveals
new details of the chaos at the Big Three. Conversations recounted in the book were based on more than 100 interviews.

October 1, 2011


“HI, Bill, it’s Rick Wagoner. You know, I think it’s really time we put our companies together.”

Bill Ford wasn’t sure he’d heard right. Mr. Wagoner, the chairman and chief executive of General Motors, wanted to talk about a merger between Ford and G.M.?

He did. Mr. Wagoner and his operating chief, Fritz Henderson, would come by to talk.

Mr. Ford was stunned. He knew G.M. was desperate. But even now, in July 2008, he had no idea it was this desperate. And he couldn’t snub Rick Wagoner. Sure, Mr. Ford said. Come on over, and bring Fritz.

The idea had been the subject of theoretical debate for years. What if G.M. and Ford joined forces? Even in their shrunken state, they would have a combined 38 percent share of the United States market, and a huge international presence. All that purchasing power, manufacturing muscle and technical skill under one roof. Thousands of overlapping jobs could be eliminated. Painful as that might be, it could save billions. Chrysler? Forget it. Instead of a Big Three, there would be a Big One.

But could it even be done? G.M. and Ford had competed head-on for decades. This was not just a rivalry. This was opposite sides of town, you-stay-on-yours-and-I’ll-stay-on-mine. So, as a practical matter, a merger had never been seriously considered — until now.

Bill Ford didn’t like the sound of it. G.M. must be in serious trouble if its executives were coming to Ford for help or answers. The idea of a merger nauseated him. The U.A.W. would go nuts.

Mr. Ford spoke with his C.E.O., Alan R. Mulally, and they agreed that they had to talk to G.M., if only to find out what was going on. Mr. Wagoner’s approach was out of character. Maybe G.M. was in even worse shape than it was letting on.

The meeting that followed would profoundly affect the course of both automakers. Mr. Wagoner and Mr. Henderson arrived with Ray Young, G.M.’s chief financial officer. Don Leclair, Ford’s C.F.O., joined, too.

Mr. Wagoner began. G.M. and Ford should merge, he said. The synergies would be phenomenal. Savings would be huge. The possibilities were endless.

Bill Ford was shocked. G.M. was serious. Who, he asked, would run this new company? As bad as Ford’s stock price was, Ford still had a higher market value than G.M.

Mr. Wagoner noted that G.M. was bigger in terms of sales. So, by all rights, it should probably be in charge. But maybe they could share management, or discuss it later, he suggested.

Mr. Mulally mostly listened. He wanted to know more about G.M.’s true state. He surely didn’t want any part of any merger. As far as he was concerned, G.M. was a roaring five-alarm fire. Why, he asked, was it coming to Ford now?

Mr. Wagoner and Mr. Henderson explained that G.M. was running low on cash and was having trouble borrowing money. By merging with Ford, it could go back to Wall Street.

So that’s what this is about. G.M. is going broke, Bill Ford realized. Ford had $30 billion in the bank, and that’s what G.M. really wanted. It wasn’t about Ford at all. It was about saving G.M. Mr. Ford didn’t need to hear any more. “No thanks,” he said. “This would never work out. “

Mr. Henderson jumped in, reiterating how good a marriage could be. “Don and I did a lot of work on this earlier,” he said. “I know G.M. inside and out, and Don knows Ford inside and out. Between the two of us we could figure it out pretty quickly.”

Mr. Leclair kept his mouth shut. Mr. Ford was doing the talking.

“No,” Mr. Ford said. “No, thanks.”

Mr. Wagoner understood. This wasn’t happening. “Well if you don’t do it with us,” he said, “we’re going to look elsewhere.” With that, the G.M. execs left.

At first, Mr. Ford was angry. G.M. could be so arrogant. But the overture was disturbing. If G.M. went bankrupt, a big part of the automotive supply chain could collapse. That would hurt the entire industry, including Ford. Bill Ford respected G.M.’s power and mass as no one else at Ford could. After all, he is a great-grandson of Henry Ford.

“I grew up in this town, and G.M. was the giant,” he later recalled. “That was just the reality of life for me from childhood.”

Mr. Mulally was amazed at G.M.’s desperation. From the day he came to Ford, he wanted to beat G.M., and to beat it badly. So if G.M. was going belly-up or merging with someone, he wanted to know. But Ford was on its own road, and he wasn’t turning over the wheel to Rick Wagoner or anyone else.

A FEW weeks before the G.M.-Ford meeting, Rick Wagoner assembled his senior executives at G.M.’s base in the Renaissance Center downtown for an announcement: G.M. was not going under — not yet.

“We are highly confident that we have ample liquidity through 2009,” he told reporters.

But could G.M. really survive for 18 months, given that it was burning through more than $1 billion a month?

Mr. Wagoner said G.M. would raise a $15 billion “cushion,” primarily by cutting thousands of salaried jobs, suspending its stock dividend, freezing wages, canceling executive bonuses and eliminating health care coverage for white-collar retirees over 65. On top of that, it would whack 300,000 more units of truck production, cut marketing costs (including dropping its giant Nascar and professional golf sponsorships), reduce spending on new products by 20 percent and delay its first big payment into the U.A.W. health care trust.

All of that would save about $10 billion, Mr. Wagoner said. After that, G.M. hoped to raise $5 billion by selling everything it could — real estate and the rest of its G.M.A.C. finance unit, as well as its Hummer brand and maybe others. Finally, it would borrow whatever it could on Wall Street, using assets in the United States and abroad as collateral.

It sounded as if G.M. was burning the furniture so it wouldn’t freeze to death. Bob Lutz, G.M.’s vice chairman, swore that the company would not compromise on the quality of its new models. But this was the first time it had decided to cut capital spending this much since the recession of the early 1990s.

Mr. Wagoner looked grim. He wore a gray suit, a yellow-striped tie and a long face, the corners of his mouth frozen in a frown. As he sat with his hands folded in front of the bright blue G.M. logo, he appeared to be trying to convince the reporters of something he had a hard time believing himself.

“Our plan is not a plan to survive,” he said flatly. “It is a plan to win.”

Questions were taken, but not really answered. Before the press conference ended, Moody’s Investors Service had downgraded G.M.’s credit rating deeper into junk status.

Afterward, when Mr. Henderson made the first calls to big banks in New York, it was as if no one even wanted to answer the phone. Asking investment banks to raise even a few billion dollars was a joke. He swallowed hard. “It was bad,” he later recalled. “Things just kept getting worse and worse and worse.”

G.M. needed something to open Wall Street’s spigots. That something, he told Mr. Wagoner, was a merger with Ford.

To his surprise, Mr. Wagoner agreed.

AFTER Ford rejected G.M.’s proposal, Mr. Henderson felt as if someone had popped his balloon. So much for the event that would convince Wall Street to lend to G.M. “That would have been the catalyst,” he would recall later. “You could actually use it to raise capital because the amount of synergies would be massive. Massive!”

Now he felt a growing sense of dread. He had been counting on Ford to be a lifeline. At this point, he knew G.M.’s financial status better than anyone, even Mr. Wagoner. He couldn’t blame Ford for slamming the door. His idea might have worked, he said later. “But sitting in their shoes, I could understand why they didn’t want to do it,” he said. “It wasn’t a simple call for them.”

Mr. Lutz was disappointed to hear how the Ford meeting had gone. To him, a merger would prove once and for all that an American company could whip Toyota, or anyone else. “It could be one large, enormously powerful global automobile company,” he had argued. “You could shut one proving ground, one finance department, one tax department, a bunch of plants, get rid of a lot of engineering. We could get rid of the fixed costs even before the acquisition.”

Mr. Wagoner didn’t even want to talk about it. He had tried and failed. Move on, he figured. It was another example of G.M.’s dysfunction at the top. There was something missing among Mr. Wagoner, Mr. Lutz and Mr. Henderson, some chemistry or cover-my-back mentality. They worked together, but not “together,” as the Ford guys did.

Nobody outside the tight inner circles at G.M. and Ford knew of the secret meeting. To much of the world, the two companies were joined at the hip, Detroit’s version of Dumb and Dumber. The public and cable TV’s talking heads were no longer distinguishing among the Big Three. It was everybody’s turn in the barrel.

That was driven home with the financial results for the 2008 spring quarter: an $8.7 billion loss at Ford, the worst quarter in its 105-year history, and a $15.5 billion loss at G.M., its third worst in a century. The numbers were staggering. G.M.’s revenue in North America had fallen $10 billion — a breathtaking 33 percent — from the year-earlier quarter. Ford took an $8 billion charge just to write down assets. The whole United States car market had imploded.

Yet G.M.’s board seemed to be in denial. The lead director, George Fisher, jumped to the company’s defense. “I’m reading too much stuff in the papers these days that is wrong,” Mr. Fisher grumbled in an interview. “It’s a distraction to the board and a distraction to management.” Was G.M. headed for bankruptcy? “The answer is no, absolutely not,” he said.

His optimism seemed remarkable. Mr. Wagoner and Mr. Henderson had just hurled a Hail Mary pass in Ford’s direction. Sales were atrocious and getting worse. Cash reserves were dwindling, and more expenses were coming in. Delphi, the big auto parts maker that had been spun off from G.M., was trying to find a private-equity buyer to emerge from bankruptcy. And it looked as if G.M. would be on the hook for another $3 billion to $4 billion to cover pension obligations of Delphi workers.

No happy talk was coming from Ford. Mr. Mulally, in daily sessions with senior executives, kept raising the volume. “What does a sustainable Ford look like, gentlemen?” he asked at one point. “Why are we in business? We are in business to create value. And we can’t create value if we go out of business.”

Excuses were unacceptable. “Why can’t we make money on small cars?” he asked. “Do you think Toyota can’t make money on small cars?”

On the day Ford reported its huge loss, it rolled out the next phase of Mr. Mulally’s transformation plan — converting three truck plants in Michigan, Kentucky and Mexico to small-car production, ramping up the output of four-cylinder engines and introducing a new wrinkle in “EcoBoost,” an engine technology that simultaneously increased power and fuel economy. Industry analysts were floored that Ford was pouring so much money into capital improvements under such dire circumstances. But Mr. Mulally seemed impervious to the sense of panic building in Detroit.

ON Aug. 4, as Mr. Mulally huddled with his team, Bill Ford was en route to Lansing to meet Barack Obama, then running for president. The one-on-one had been arranged by Gov. Jennifer Granholm of Michigan, a personal friend of Mr. Ford. Bill Ford wanted to get to know this young, environmentally minded candidate. The election was three months away, and Mr. Obama looked like a winner.

Much of what was happening to the American auto industry had political overtones. Ford was aware that G.M. was planning to go to Washington to lobby for aid. Specifically, Mr. Wagoner wanted some of the $25 billion in Department of Energy loans authorized by Congress the previous year, when lawmakers passed new fuel-economy standards. The loans were intended as seed money for technology to meet the tougher guidelines. But the $25 billion wasn’t in the budget yet, and G.M. was taking no chances. It needed that money — and not just for greener cars.

Mr. Ford had a growing sense that whatever went down in Detroit, the federal government would be intimately involved. And he wanted to make a personal connection with the man who could be the next president.

Mr. Obama had a huge crowd for his speech at Michigan State University. Cheers came in waves when he promised to help Michigan out of its woes.

“I know how much the auto industry and the autoworkers of this state have struggled,” he said. “But I also know where I want the fuel-efficient cars of tomorrow to be built — not in Japan, not in China, but right here in the United States of America. Right here in the state of Michigan!”

Afterward, he and Mr. Ford met alone. Mr. Obama had been forthright on the campaign trail about Detroit’s past, its dependence on gas-guzzling trucks and its reluctance to change. He had echoed those points in his speech, speaking of ending America’s dependence on foreign oil.

“We desperately need a new energy policy in this country,” he told Mr. Ford. “And I would like the domestic auto industry to be part of the solution, not part of the problem.”

Mr. Ford had a ready reply: “We’d love to work with your administration. I passionately believe that Ford can and should be part of the solution.”

Then he went through Ford’s transformation: smaller cars, cleaner engines, electric vehicles in development. “The vision I have is for us to be a global, green, high-tech company,” he said. “And that’s not just a vision.”

The two hit it off and then got technical — how to build batteries for electric cars, create an infrastructure of charging stations, target tax credits to shift consumers into super-efficient vehicles. When it was over, they shook hands like new friends. Mr. Ford felt great. Everything Mr. Obama wanted, he wanted, too. “I think he’s exactly in line,” Mr. Ford said after the meeting, “with where society wants us to go.”

GREEN cars were also very much on Mr. Wagoner’s mind. In late summer 2008, he told Mr. Lutz that the single biggest product responsibility on his plate was to deliver a working version of the Chevrolet Volt plug-in hybrid by Sept. 16 — the day of G.M.’s 100th birthday celebration. “Bob, we need it then,” Mr. Wagoner said.

Mr. Wagoner was gearing up for the ultimate sales job: to persuade Washington to help G.M. The presidential campaign was about to kick into overdrive. The Bush administration was already swamped with Wall Street’s crisis, and Congress was in its re-election frenzy. If G.M. was to win over Capitol Hill and the White House, it needed a powerful message. It couldn’t come limping in, begging. It had to represent progress, innovation, a bright future.

That’s where the Volt came in. It was the one car G.M. had that nobody else had, a blend of electric power and convenience. When the battery ran down, a little motor kicked in and kept it going. What could be smarter?

Mr. Lutz had been riding the Volt team hard. For once, he could stick it to Toyota. But he wasn’t sure about that September timetable. The Volt wouldn’t even go on sale for another two years. Was it really necessary to have it ready for the G.M. birthday party?

Yes, Mr. Wagoner told him. G.M. needed that car.

G.M. got the Volt, but it wasn’t enough. By the time the first one rolled off the line on Nov. 30, 2010, Mr. Wagoner had been forced out by the Obama administration as part of a $50 billion bailout.

Copyright © 2011 by Bill Vlasic. To be published on Oct. 4, 2011, by William Morrow, an imprint of HarperCollins Publishers.

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From: Glenn Petersen11/17/2011 3:06:30 AM
   of 431
U.S. boosts estimate of auto bailout losses to $23.6B

David Shepardson/ Detroit News Washington Bureau
Last Updated: November 14. 2011 7:22PM

The Treasury Department dramatically boosted its estimate of losses from its $85 billion auto industry bailout by more than $9 billion in the face of General Motors Co.'s steep stock decline.

In its monthly report to Congress, the Treasury Department now says it expects to lose $23.6 billion, up from its previous estimate of $14.33 billion.

The Treasury now pegs the cost of the bailout of GM, Chrysler Group LLC and the auto finance companies at $79.6 billion. It no longer includes $5 billion it set aside to guarantee payments to auto suppliers in 2009.

The big increase is a reflection of the sharp decline in the value of GM's share price.

The current estimate of losses is based on GM's Sept. 30 closing price of $20.18, down one-third over the previous quarterly price.

GM's stock closed Monday at $22.99, up 2 percent. The government won't reassess the estimate of the costs until Dec. 30.

The government has recovered $23.2 billion of its $49.5 billion GM bailout, and cut its stake in the company from 61 percent to 26.5 percent. But it has been forced to put on hold the sale of its remaining 500 million shares of stock.

The new estimate also hikes the overall cost of the $700 billion Troubled Asset Relief Program costs to taxpayers. TARP is the emergency program approved by Congress in late 2008 at the height of the financial crisis.

In total, the government used $425 billion to bailout banks, insurance companies and automakers, and provided $45 billion in housing program assistance.

The government now expects to lose $57.33 billion, including the full cost of the housing program, up from $36.7 billion. The new estimate means the government doesn't believe it will make an overall profit on its bailouts.

Republican presidential candidates, including former Massachusetts Gov. Mitt Romney, have seized on the auto bailout losses estimates, as evidence that the Bush and Obama administrations "wasted" money.

Matt Anderson, a spokesman for the Treasury Department, said, "Both TARP and the auto industry rescue are still on track to cost a fraction of what was originally expected during the dark days of the financial crisis."

In 2009, the government initially forecast it would lose $44 billion on its auto industry bailout. It revised it down to $30 billion, and later to as low as $13.9 billion earlier this year.The administration and President Barack Obama have argued that any losses on the auto bailout were worth the hundreds of thousands of jobs saved.

"The investment paid off. The hundreds of thousands of jobs that have been saved made it worth it," he said at an appearance last month at GM's Orion Assembly plant. "I want to especially thank the people of Detroit for proving that, despite all the work that lies ahead, this is a city where a great American industry is coming back to life and the industries of tomorrow are taking root, and a city where people are dreaming up ways to prove all the skeptics wrong and write the next proud chapter in the Motor City's history."

The new bailout forecast also represents an increase in the government's forecast in its losses from its $17.2 billion bailout of Detroit-based auto and mortgage lender Ally Financial Inc. The government holds a 74 percent stake in Ally, which has been forced to put its planned initial public offering on hold because of market conditions.

(202) 662-8735

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From: TimF12/8/2011 6:09:40 PM
   of 431
Question for GM
December 8, 2011, 10:32 am

GM has announced it is willing to give a full refund to customers who bought Volts and are worried they will burst into flames. My question is this: In these refunds, does GM or the car buyer intend to reimburse the taxpayer for the $7500 subsidy we kicked in?

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From: TimF12/10/2011 7:13:09 PM
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Dispatches from the Corporate State: A Study in Contrasts
December 9, 2011, 11:39 am

It is interesting to study the contrast between the handling of the Toyota accelerator problems, which turned out to be pretty much all driver error, and the Chevy Volt fire issues.

In the case of the former, we had public hearings and government threats. The government, without evidence at that point, demanded Toyota recall the vehicles and stop production. Eventually, when the NHTSA determined that the panic and recall was in error and the issue was operator error and not with the car, the Obama Administration suppressed the results.

Now, Volts appear to have a fire problem with their batteries. This time, the government is keeping things real quiet and, instead of exaggerating the safety issue, they are suppresing it

It now appears the fire hazard was first discovered back in June, when GM first heard about a fire in a Volt that occurred some three weeks after the vehicle had been crash tested.

Yet, almost five months went by before either GM or the US National Highway Traffic Safety Administration (NHTSA) told dealers and customers about the potential risks and urged them to drain the battery pack as soon as possible after an accident.

Part of the reason for delaying the disclosure was the “fragility of Volt sales” up until that point, according to Joan Claybrook, a former administrator at NHTSA.

Demagoguing a non-problem in the first case, covering up a real problem in the second. Guess which one has a union that supported Obama’s election and which does not. Guess which one Obama bought equity in with taxpayer money?

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From: Glenn Petersen12/15/2011 3:47:49 PM
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Japanese Automakers Employ 407,000 Americans at 63 Facilities and Hundreds of Auto Dealerships

Mark J. Perry
Wednesday, December 14, 2011

Japan's automakers employ 407,000 Americans at these 29 plants and 34 R&D and design centers.

1. Japanese automakers like Toyota, Honda, and Nissan are responsible for more than 407,000 jobs in the U.S. The vast majority of employees are those working at Japanese auto dealerships in the U.S., but Japanese automakers employ 50,000 American workers at 29 American vehicle, engine and parts plants, and another 4,000 at 34 major R&D and design centers, reflecting $34 billion of investment in the U.S.

2. Japanese makers are producing most of the cars they sell in America in North America -- 68% altogether.

3. Exported vehicles from Japanese plants in the U.S. last year increased to more than 145,000, up from 94,000 in 2009.
With a strong yen today, the trend will continue, and will be be supplemented by new exports of U.S.-built Toyotas to South Korea following the recent ratification of the free trade agreement.

Those are some of the facts highlighted by USAToday based on a Japanese Automobile Manufacturers Association report being released this week.

HT: Robert Kuehl

Posted 10:24 PM

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To: stockman_scott who wrote (396)12/19/2011 6:12:51 PM
From: Glenn Petersen
   of 431
Saab may liquidate:

Saab Files for Liquidation

New York Times
December 19, 2011

PARIS — The owner of Saab Automobile finally threw in the towel Monday, filing for bankruptcy after hopes of a life-saving investment from Chinese investors collapsed in the face of opposition from General Motors.

Saab and two subsidiaries filed with the District Court in Vanersborg, Sweden, according to Saab’s parent company, Swedish Automobile. The parent company said it “does not expect to realize any value from its shares in Saab Automobile,” and that it “will write off its interest in Saab Automobile completely.”

Viktor Muller, the Dutch entrepreneur who had previously been chief executive of the sports car maker, Spyker Cars, acquired Saab from G.M. in January 2010 for $74 million in cash and $326 million in preferred shares. But he was unable to obtain the financing he needed to modernize the Saab line-up and reinvigorate sales at a time of global financial turmoil.

The court said it had appointed two receivers who were responsible for either selling the company outright or breaking it up and selling it piecemeal. The proceeds would be used to repay Saab’s creditors.

In a last bid for survival, Saab had been trying in recent months to arrange an infusion of cash from Chinese investors, including Zhejiang Youngman Lotus Automobile.

But “G.M. said over the weekend ‘whatever happens, come hell or high water, we won’t support a deal with Youngman,”’ Mr. Muller said.

“I honestly don’t know” why G.M. refused to budge, he added. “They wouldn’t tell me.”

He said there remained a glimmer of hope for Saab, as there were still “parties out there that have expressed an interest.” But the automaker’s fate, he said, now rested in the hands of its receivers.

Mr. Muller’s efforts to keep Saab afloat became increasingly desperate after suppliers stopped extending credit in the spring, forcing production to halt.

With salaries unpaid, unions at Saab began legal proceedings in September that could have led to liquidation of the company. Mr. Muller responded by voluntarily seeking court protection from creditors, gaining time to seek funds.

But General Motors, which retained an effective veto on any deal because it owned key patents used by Saab, refused to back the Chinese investment, fearing it would “negatively impact G.M.’s existing relationships in China.”

Swedish Automobile said that Youngman, having considered G.M.’s position, “informed Saab Automobile that the funding to continue and complete the reorganization of Saab Automobile could not be concluded.”

“The board of Saab Automobile subsequently decided that the company, without further funding, will be insolvent, and that filing bankruptcy is in the best interests of its creditors,” it said.

James R. Cain, a G.M. spokesman on financial communications in Detroit, described the bankruptcy filing Monday as “the end of a very long and difficult road” for Saab.

Mr. Cain disputed the idea that the U.S. company had been uncooperative, saying that G.M. had been “very clear and very consistent at the late stages, when the sale was proposed, because we felt it was in the best interest of everyone to understand what our concerns were, and we never wavered from that.”

Mr. Muller said “maybe three” companies remained interested in acquiring Saab, and that in some respects bankruptcy would make the company more attractive, as there were advantages to picking it up with a clean slate.

To make a go of it, he said, any buyer would have to obtain G.M.’s permission to make the Saab 93, 94 and 95 models. A buyer would also have to obtain permission from Saab AB, the now-unrelated aerospace company from which the automaker originated, to use the Saab brand.

In a statement, Stefan Lofven, head of the IF Metall union, called on the Swedish government to help the more than 3,000 Saab employees to find new jobs. He also urged Saab’s administrator to arrange a sale of the company quickly as a single unit.

Anette Hellgren, president of the Unionen white-collar local union in Trollhattan, said the carmaker’s employees remained in limbo because of the hope of another buyer emerging. “In this time, not knowing where to go, it’s very hard,” she said.

“I don’t think people blame Mr. Muller,” she said, noting that he was met with applause Monday when he went to address workers. “It was a pity that it didn’t work out. He made all his efforts to make it fly.”

Despite a famously loyal base of customers, Saab has reported a profit only once in the past two decades, and the fact that all of the global automakers have passed it over suggests a different fate ahead. Analysts expect the company, which began selling cars in 1949, to be broken up and sold in bits.

“There’s not much left to salvage,” Anders Trapp, an auto industry analyst at Skandinaviska Enskilda Banken in Stockholm, said, noting that Saab’s customer base had been dwindling as the problems grew. “Maybe the brand will continue in some form, but there’s not much left of it anymore.”

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From: TimF12/21/2011 11:00:48 PM
   of 431
Fannie and Freddie: Worse Than We Thought
December 20, 2011, 9:52 am

From Edward Pinto at the American

Fannie and Freddie entered into agreements accepting responsibility for misleading conduct discovered by the SEC, including:

1. As of June 30, 2008, Freddie had $244 billion in subprime loans, while investors were told it had only $6 billion in subprime exposure.

a. Freddie knew it was inadequately compensated for the risks it was taking. For example, it was taking on “subprime-like loans to help achieve [its] HUD goals” that were similar to private fixed-rate subprime, but the latter typically received “returns five to six times as great,” says the complaint.

b. Freddie had concerns about risk layering on loans with an LTV >90% and a FICO <680. (Yet, in Freddie’s disclosures it only noted risk layering concerns on loans with an LTV >90% and a FICO <620. This is a major difference since only 10 percent of its loans fell into the LTV >90% and a FICO <620 category, while nearly half fell into the LTV >90% and a FICO <680 one.)

2. As of June 30, 2008, Fannie had $641 billion in Alt-A loans (23 percent of its single-family loan guaranty portfolio), while investors were told it had less than half that amount ($306 billion, or 11 percent of its single-family loan guaranty portfolio).

3. The SEC complaint disclosed that Freddie had a coding system to track “subprime,” “other-wise subprime,” and “subprime-like” loans in its loan guaranty portfolio even as it denied having any significant subprime exposure.

These suits are important because they demonstrate that Fannie and Freddie “told the world their subprime exposure was substantially smaller than it really was … and mislead the market about the amount of risk on the companies’ books,” said Robert Khuzami, director of the SEC’s Enforcement Division.

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From: TimF12/29/2011 10:35:45 PM
   of 431
Solutions for America: Restoring the U.S. to a Free Economy

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