Archive for the ‘General Motors’ Category

Obama Administration May Not Understand Economy

March 22, 2009

When it comes to our complex economy, President Barack Obama would do well to heed the physician’s ancient commandment to first “do no harm.”

Instead, Obama’s administration has been prescribing all sorts of multibillion-dollar borrowing remedies without any consistent diagnosis of what is exactly wrong with the weak economy or even how bad things actually are.

By Victor Davis Hanson
The Washington Times

Since becoming president, Mr. Obama has offered numerous bleak economic prognoses. He has told Americans: “The situation we face could not be more serious. We have inherited an economic crisis as deep and as dire as any since the Great Depression.” He has also warned, “Recovery will likely be measured in years, not weeks or months” and “If nothing is done, this recession could linger for years.”

But suddenly last week, physician Barack Obama flipped and issued an entirely new prognosis: “I don’t think things are ever as good as they say, or ever as bad as they say.” He added. “[Things] are not as bad as we think they are now.”

What happened to living through hard times akin to the Great Depression?

Maybe it was the unexpected news that Citibank and Bank of America are starting to show a profit – thanks to the past bailouts of 2008 and new profitable loans. Maybe it was General Motors’ recent decision not to (for now) ask for more federal cash. Maybe it was the reports that consumer spending is not down as much as feared.

Or did Mr. Obama’s change in rhetoric reflect a sort of premeditated strategy: talk down the economy to scare everyone into supporting more government spending and borrowing. Then, once the stimulus bill has passed, talk up the economy to reassure us that it will work?

Or, as seems more likely, does the new government simply not know what is going on – much less what to do about it?

It can’t seem to fill slots at the Treasury Department, and strangely talks about fiscal responsibility and the evils of pork-barrel spending while expanding upon the Bush budget deficit and approving more than 8,000 earmarks.

Mr. Obama – and Congress – should take a deep breath before further expanding the budget with ever-more stimulus spending, borrowing and aggregate debt that will plague our children, who will have to pay back the trillions long after this present recession ends.

Read the rest:
http://www.washingtontimes.com/new
s/2009/mar/22/first-of-all-do-no-harm/

Related:
Public Outrage Could Devour Obama Presidency

Financial Advice, Recovery, Trumped by Obama, Congress, Media, Polls

Protesters At Homes Of AIG Execs

Wall Street Journal: “Geithner Incapacitated;” President Voices Support

Government To Have Bigger Role in All American Lives; Obama Seeks to Increase Oversight of Executive Pay

Dodd Caper, House Vote on 90% Tax, Highlights Founders Hopes; Modern Reality

Advertisements

Obama adviser: Auto industry must restructure

February 15, 2009

President Barack Obama‘s senior adviser said Sunday that any plan to shore up the auto industry will need to require sacrifice by all involved, from auto workers and industry executives to shareholders and creditors.

By DOUGLASS K. DANIEL, Associated Press Writer

General Motors Corp. and Chrysler LLC are expected to submit plans to the government by a Tuesday deadline to show how they can repay billions in loans and become viable in spite of a drop in auto sales not seen for a generation.

“We need an auto industry in this country. There are millions of lives, livelihoods that depend on it,” White House adviser David Axelrod said on “Meet the Press” on NBC. “We have a real interest in seeing the auto industry survive, but it’s going to require a major restructuring of the auto industry.”

Asked if the U.S. economy could withstand a bankruptcy at GM, Axelrod didn’t respond directly. Executives at the two automakers have said bankruptcy would not benefit their companies because consumers would be reluctant to buy cars from an automaker that might go out of business.

“How that restructuring comes is something that has to be determined,” he said. “But it’s going to be something that’s going to require sacrifice not just from the auto workers but also from creditors, from shareholders and the executives who run the company. And everyone’s going to have to get together here to build companies that can compete in the future.”

Axelrod wouldn’t say whether the administration would offer the auto industry more bailout money. GM already has borrowed $9.4 billion to stay in business, and it would receive an addition $4 billion if the Treasury Department approves its viability plan. Chrysler wants $3 billion more on top of the $4 billion it has already borrowed.

“We need to see what it is that they come up with this week,” he said.

Read the rest:
http://news.yahoo.com/s/ap/20090215/ap_o
n_go_pr_wh/obama_autos

Toyoto Passes GM in Sales; GM Fears Cash Collapse

January 21, 2009

Poor GM.  It may run out of money before March 31st, and for the first time ever, Toyota sold more cars than the stuggling U.S. automaker.

General Motors sold fewer cars globally than Toyota last year, as the Japanese automaker passed the Detroit company for the first time. GM says it sold 8.356 million cars and trucks in 2008, falling about 616,000 vehicles short of Toyota’s total of 8.972 million.  General Motors Corp. posted an 11 percent drop for the year, while Toyota’s sales fell 4 percent.

Associated Press

And now GM needs some money – quick!

The target date for General Motors Corp. to get its second installment of government loans passed last week, but a top company executive says he expects the money to arrive in the next several days.

Fritz Henderson, GM’s president and chief operating officer, said without the second installment of $5.4 billion, the company would run out of cash long before March 31.

In December, the Treasury Department authorized $13.4 billion in loans for GM and another $4 billion for Chrysler LLC to keep both automakers out of bankruptcy.

Read the rest:
http://www.nydailynews.com/money/2009/01/2
1/2009-01-21_general_motors_may_run_out_o
f_cash_by_ma.html

Saving Capitalism No Sure Thing If “Cure” Undermines Economy

December 22, 2008

What’s good for General Motors may not ultimately be best for the global economy.

The Bush administration’s $13.4 billion rescue of GM and Chrysler is a fitting finish to a year in which governments around the world expanded their role in the economy and markets after three decades of retreat.

The intervention comes at what may prove to be a steep price. Future investment may be allocated less efficiently as risk-averse politicians make business decisions. Whenever banks decide to lend again, they are likely to find new capital requirements that will curb how freely they can do it. Interest rates may be pushed up by government borrowing to finance trillions of dollars of bailouts.

“We’re seeing a more statist world economy,” says Ken Rogoff, former chief economist at the International Monetary Fund and now a professor at Harvard University in Cambridge, Massachusetts. “That’s not good for growth in the longer run.”

It’s not good for stocks either, says Paola Sapienza, associate professor of finance at Northwestern University’s Kellogg School of Management. Slower economic growth means lower profits. Shares might also be hurt by investor uncertainty about the scope and timing of government intervention in the corporate sector.

“If the rules of the game are changing, people are reluctant to invest in the stock market,” Sapienza says.

From Bloomberg
By Simon Kennedy, Matthew Benjamin and Rich Miller

Read the rest:
http://www.bloomberg.com/apps/news?pi
d=washingtonstory&sid=aDjmuEpDoctc

Bush Administration, Auto Execs Recrafting Bailout Plan

December 16, 2008

Bush administration officials and auto executives worked Monday to try to seal a deal for a multibillion-dollar industry bailout, amid hopes that the money could be available this week.

“It seems like the planets are becoming aligned,” said Rep. Fred Upton (R-Mich.), co-chairman of the Congressional Auto Caucus, who added that administration officials indicated to him that an announcement was likely by Wednesday.

By Jim Puzzanghera
The Los Angeles Times

General Motors Corp. and Chrysler have said they are near bankruptcy, and they have crucial payments due Jan. 2 to many auto part suppliers. With the holidays approaching, the Bush administration and the auto companies would need time even after a deal is completed to process the money, Upton said.

“It has to get done in the next day or two,” he said.

President Bush said his administration was moving quickly.

“This will not be a long process, because of the economic . . . fragility of the autos,” he told reporters late Sunday aboard Air Force One during his trip to Iraq and Afghanistan. The size of an emergency loan package and what strings the government would attach remained unclear Monday as officials reviewed the complex finances of GM and Chrysler.

Read the rest:
http://www.latimes.com/business/la-fi-bailout1
6-2008dec16,0,3974615.story?track=rss

“Bailout Fatigue”: Automakers’ Treatment May Extend To Other Industries

December 15, 2008

In punting on a $14 billion rescue plan for the US auto industry, the US Senate has signaled that the struggle over who gets federal help – and who is left to take their lumps in the marketplace – is likely to be an acute and ongoing issue for lawmakers into the next Congress.

The auto bailout now falls to the Bush administration, at least for the moment. The White House said Friday it may tap part of the $700 billion meant to buttress the shaky financial-services sector for the purpose of saving any of Detroit’s Big Three from collapse. At time of writing, the administration was deciding what mechanism to use to help the industry.

By Gail Russell Chaddock
Christian Science Monitor

General Motors workers file out of the General Motors Assembly ... 
General Motors workers file out of the General Motors Assembly Plant in Arlington, Texas, during shift change Friday, Dec. 12, 2008. Festering animosity between the United Auto Workers and southern Senators who torpedoed the auto industry bailout bill erupted into full-fledged name calling Friday as union officials accused the lawmakers of trying to break the union on behalf of foreign automakers.(AP Photo/Tom Pennington)

Regardless, this month’s fight in the lame-duck Congress over the auto bailout is a cautionary tale for how lawmakers are likely to deal with future calls for help. Lesson No. 1 is that swift congressional action based on the premise that an industry is too big to fail – or that job losses in the absence of a government bailout would be cataclysmic for the economy – cannot be counted on.

It’s an argument that worked for the financial-services industry, which in early October extracted from Congress as much as $700 billion in government funds to save it from ruin tied to mortgage-related debt. But the way the Treasury Department has allocated the first $350 billion in the Troubled Asset Relief Program (TARP) has led to buyers’ remorse among many lawmakers – and appears to be making them more reticent to dole out dollars to ailing industries.

Read the rest:
http://news.yahoo.com/s/csm/2008
1215/ts_csm/awhyone

GM Should Live; Bush Plans Bailout from TARP

December 13, 2008

Dec. 13 (Bloomberg) — General Motors Corp. moved closer to a possible government rescue as the Bush administration said it may tap a bank bailout fund for financing and GM’s top executive discussed terms with administration officials.

GM Chief Executive Officer Rick Wagoner spoke by telephone with White House Chief of Staff Joshua Bolten and Treasury Secretary Henry Paulson about a short-term plan to keep the automaker solvent, a person familiar with the talks said.

The General Motors logo is seen outside the GM headquarters ... 
The General Motors logo is seen outside the GM headquarters in downtown Detroit, Friday, Dec. 12, 2008. GM announced it will temporarily close 20 factories across North America and make sweeping cuts to its vehicle production as it tries to adjust to dramatically weaker automobile demand.(AP Photo/Carlos Osorio)

The talks followed a statement by the White House that it would consider using the Troubled Asset Relief Program to help GM and Chrysler LLC following the Senate’s rejection of an aid package the night before.

“Congress has really punted the ball over to the White House,” John Bogle, founder of the $80.6 billion Vanguard 500 Index Fund, said in a Bloomberg Television interview. “That will give them temporary stopgap aid. I do not think General Motors is going to go out of business.”

Read the rest:
http://www.bloomberg.com/apps/news?
pid=20601068&sid=aixBaUTzr7UU

Senate Fails To Bailout Automakers But Bush May Fund Shortfall

December 12, 2008

The Bush administration would consider using money from a fund intended to rescue U.S. financial markets to prevent the collapse of the nation’s auto companies, White House spokeswoman Dana Perino said.

Bloomberg

“Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms,” Perino told reporters aboard Air Force One. “However give the current weakened state of the U.S. economy we will consider other options if necessary, including use of the TARP program to prevent a collapse of troubled automakers.”

General Motors Corp. and Chrysler LLC have said they need a total of $14 billion in loans to keep operating. An aid package for the automakers failed in the Senate last night.

Bush was pressed by House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid to tap funds from the Treasury’s $700 billion bank-rescue fund.

The Bush administration had warned of a million lost jobs if the industry imploded. The Senate vote was a repudiation of Bush, who personally lobbied for the bill. Only 10 Republicans in the Senate voted to move forward on the auto-rescue plan.

Read the rest:
http://news.yahoo.com/s/bloomberg/20081212/pl_
bloomberg/avqpiejeowq

Cheney on Auto Bailout Failure: It’s ‘Herbert Hoover’ time

December 12, 2008

Senate Republicans’ dramatic revolt against a White House-backed auto industry rescue plan is fraught with political risk.

While the high-stakes gambit places them squarely within the mainstream of anti-bailout public sentiment, at the same time it exposes the party to potentially devastating criticism that its failure to compromise doomed the Big Three automakers and deepened the economic recession.

Republicans argue that their rejection Thursday evening of a $14 billion loan package came in response to the concerns of angry taxpayers who are unwilling to pay for an auto industry bailout on the heels of October’s $700-billion financial bailout package.

By Manu Raju, Politico

Auto bailout 

Above: Lawmakers in a car wreck.  Photo by Associated Press

“I think it would appear that the people who voted against this are carrying out the will of the voters as expressed through the phone calls to our offices,” said Sen. Charles Grassley (R-Iowa).

But that sentiment betrays the deep rifts the issue has revealed within the party, pitting Rust Belt and auto-state senators who joined Democrats in a plea for federal aid against their Southern colleagues who represent states where foreign-owned automakers constitute a significant economic presence. All of this takes place against the backdrop of an intraparty debate over whether the GOP has lost its core value of limited government.

Read the rest:
http://news.yahoo.com/s/politico/16515

$14B auto bailout dies in Senate

December 12, 2008

A bailout-weary Congress killed a $14 billion package to aid struggling U.S. automakers Thursday night after a partisan dispute over union wage cuts derailed a last-ditch effort to revive the emergency aid before year’s end.

Republicans, breaking sharply with President George W. Bush as his term draws to a close, refused to back federal aid for Detroit’s beleaguered Big Three without a guarantee that the United Auto Workers would agree by the end of next year to wage cuts to bring their pay into line with Japanese carmakers. The UAW refused to do so before its current contract with the automakers expires in 2011.

The breakdown left the fate of the auto industry — and the 3 million jobs it touches — in limbo at a time of growing economic turmoil. General Motors Corp. and Chrysler LLC have said they could be weeks from collapse. Ford Motor Co. says it does not need federal help now, but its survival is far from certain.

Democratic leaders called on Bush to immediately tap the $700 billion Wall Street bailout fund for emergency aid to the auto industry.

By JULIE HIRSCHFELD DAVIS and KEN THOMAS, Associated Press Writer

Senate Committee on Banking, Housing, and Urban Affairs Committee chairman Senator Christopher Dodd (D-CT) speaks on the phone after a vote on Capitol Hill on Thursday night.

Senator Christopher Dodd of Connecticut after the vote on Thursday night. Mr. Dodd was among the negoti ators working on the bill.Brendan Smialowski for The New York Times

Majority Leader Harry Reid, D-Nev., called the bill’s collapse “a loss for the country,” adding: “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.”

GM said in a statement it was “deeply disappointed” that the bipartisan agreement faltered. “We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis,” the company said. Chrysler, too, said it “will continue to pursue a workable solution to help ensure the future viability of the company.”

The White House said it was evaluating its options in light of the breakdown on Capitol Hill.

Read the rest:
http://news.yahoo.com/s/ap/20081212/ap_on_go_co/co
ngress_autos;_ylt=AtfAzt2dXAA4LvS8E6_k3g.s0NUE

******************

GM, Chrysler Could Collapse

The Senate on Thursday night abandoned efforts to fashion a government rescue of the American automobile industry, as Senate Republicans refused to support a bill endorsed by the White House and Congressional Democrats.
.

The failure to reach agreement on Capitol Hill raised a specter of financial collapse for General Motors and Chrysler, which say they may not be able to survive through this month.

After Senate Republicans balked at supporting a $14 billion auto rescue plan approved by the House on Wednesday, negotiators worked late into Thursday evening to broker a deal, but deadlocked over Republican demands for steep cuts in pay and benefits by the United Automobile Workers union in 2009.

Read the rest from the New York Times:
http://www.nytimes.com/2008/12/12/busin
ess/12auto.html?_r=1&hp