Chris Dodd finally gets it right–yet still blames CEOs

We are within 24 hours of a new auto bailout deal, said Sen. Carl Levin today. Sen. Chris Dodd, who has been a harsh critic of the auto industry and the bailout, finally got it right on “Face the Nation” today.

“None of us like this at all, and there’s a lot of reasons to be furious,” Dodd said, noting that more than 2 million auto-related jobs in the United States are at risk if the automakers fail. “But there’s a lot more at stake than Detroit. If this was just about some company in Detroit, I’d let them fail in a New York minute.”

Yet he is still forcing some of the blame on GM CEO Rick Wagoner:

“I think he has to move on,” Dodd said, noting that GM was in the worst shape of Detroit’s automakers. “I think you’ve got to consider new leadership.”

I think what people fail to recognize is that the Detroit 3 made their mistakes during the 1990s and have been retooling ever since about 2001. They have cut THOUSANDS and THOUSANDS of jobs, closed plants, offered buyout plans and have straight-up laid off many white collar jobs making $100k+ a year.

Wagoner has done everything he can to keep GM above water, but there are fundamental problems with the UAW contracts.

I can’t seem to find the article, but I recall reading an article in The Detroit News about how Nissan was having its first assembly line workers in Ohio retire. The headline read something like “GM: 1,200,000; Nissan: 355″–talking about how many retirement packages GM has had to pay for and how few the foreign companies have had to deal with.

Those two problems must be worked out before anything else, and they are hardly Wagoner’s fault. I’m not a big fan of Rick Wagoner, so I don’t really care if he becomes the scape goat, I think people just need to be aware the problems are much more deeply rooted than the policies of one man or one administration.

 

After a Weekend in Detroit, My Thoughts

I had to drive to downtown Detroit Saturday to drop off an internship application, and I decided to get out, walk around and take some notes, considering I hadn’t spent any time in the area for nearly a year.

1. It Lacks the Feel of a City: I’ve got to be honest, I spent most of my life in the suburbs. But in recent months, I’ve spent a considerable amount of time in Madison and Chicago, and they both have a certain feel for them. Detroit simply doesn’t have that–it’s quiet, cold, almost dreary. It was Thanksgiving and there was nobody shopping, nobody out and about.
2. Bums: Think State Street is bad? Oh man. The sad thing is the bums have given up on asking people for money–they just curl up in a ball behind a bus stop or in a park.
3. New Bars, Buildings, Hotels: There are several new of each of these in the downtown area from when I last walked around there in Thanksgiving of 07. Coming up is the Fort/Cadillac Hotel, which was remodeled into a Hilton.

Traffic, construction and the roads were awful too, just as a side note. If any of the Big 3 go down, part of Obama’s “New New Deal” may include redoing roads in Detroit, giving the jobs to former assembly line workers. As for the white collar jobs…I don’t know what’ll happen to those poor people.

 

Why Love Wall Street but not Detroit Industry?

Inspired by this fantastic column from the Free Press…

People don’t like Detroit. Or at the very LEAST, they have a very, very negative opinion of the city. Reasons:

1. It’s corrupt, dirty and crime-ridden. True, yes, but what cities aren’t? I’ll agree that the city probably doesn’t deserve a $10 billion bailout like they want, but you can’t simply say “No, you screwed up, get out.”
2. Arrogant automakers. GM, Ford, and Chrysler have all felt like they have the power to tell the consumer what to own–an poor quality SUV that won’t make it past three years. People think the Detroit 3 only make cheap cars, gas guzzling SUVs, and they think Toyota makes great vehicles with great mileage. All of that are false stereotypes.
3. The UAW. In general, unions in this country are frequently treated like socialist jerks who kick and scream until they get what they want. Again, an unfair characterization, because while UAW hasn’t helped the Detroit 3, they were doing the same things during the 70s and 80s when GM was the most prosperous company on the face of the Earth.

Again, like Tompor argues, why do people (and Washington) care more about the New York banks than the Detroit auto companies? I think the above reasons sum it up pretty well.

I’d also agree with what Sen. Carl Levin’s suggestion that GM CEO Rick Wagoner should get the boot if this bailout plan goes through.

But at least we again see Obama is thinking of Detroit, with these comments from 60 minutes tonight:

For the auto industry to completely collapse would be a disaster in this kind of environment,” Obama said. “So it’s my belief that we need to provide assistance to the auto industry. But I think that it can’t be a blank check.

 

Screw the Auto Comapnies, Let’s Just Bailout the Whole Darn City

The City Council of Detroit needs a $10 billion bailout to survive:

The resolution specifically requests the council meet with Mayor Ken Cockrel Jr., Gov. Jennifer Granholm, the state’s congressional delegation, U.S. House Speaker Nancy Pelosi and officials from President George W. Bush’s office and President-Elect Barack Obama’s transition team.

Wow. $10 billion? Is the economy really that horrible? Is money being that poorly mismanaged? If the auto companies go down, this Onion article may become a reality.

 

Why the Auto Companies Matter

It’s simple:

The potential failure of one or more of the three U.S.-based automakers would cut up to 2.5 million jobs in the first year as production ground to a halt throughout the industry, according to an auto industry consultant group on Wednesday.

Want to talk about high unemployment? Want to talk about unstable markets?

The failure of any of these companies would rock the economic state of this nation and destroy Metro Detroit as we know it.

I’m amazed this isn’t discussed more outside of Detroit.

 

2010: The Arbitrary Finish Line

In every article I’ve been reading about the Detroit Automakers since late 2006/early 2007, they keep refering to 2010 as the finish date–by then, they say, the economy will have stabilized, oil prices will be reasonable, and people will begin purchasing fuel efficient and hybrid American cars released by GM, Ford and Chrysler in 2009.

Well, 2010 is only 14 months away. And Ford still sees it as the finish line:

Ford now has $18.9 billion in cash and $10.7 billion in credit to survive until 2010 — a year that Mulally and other automotive executives have been eyeing like a finish line.

Mulally said he hopes that the economy will begin rebounding then, just as Ford’s stable of new fuel-efficient cars from Europe begins arriving in U.S. showrooms. The automaker by then also will realize the full savings of its historic labor contract with the UAW, which removes billions in health care liabilities from its balance sheet.

WHY IS THAT THE FINISH LINE? How can we know when/if the economy will stabilize? How can Ford say “we will survive” if they can only make it through 2010 under current conditions?

That includes the all-new 2009 Ford F-150 pickup, which is part of the company’s best-selling F-Series lineup and a longtime source of profitability for Ford.

The automaker also is to launch a redesigned Ford Fusion midsize car early next year. Ford has said the four-cylinder engine versions of that vehicle will deliver better fuel economy than the Toyota Camry and Honda Accord.

“We have a good plan. We’re making progress on our plan,” Mulally said. “We’re on our way.”

I just don’t get this. I don’t see a plan. I see a bunch of executives scared shitless because they can’t offer any real solutions.

I think there needs to be a serious “Buy American” movement. It was serious during the 1970s and 80s, when Toyota began competing on the global marketplace. It should be both grassroots (with free bumper stickers) and government-sponsored (Department of Commerce commercials about the importance of the Big 3).

Moreover, there needs to be some sort of tax credit for buying or leasing an American car (Say, $6000) and for buying and leasing an American hybrid car (Say, $10,000). There is already one for hybrids, but it is for every hybrid, including the very popular and posh Toyota Prius. Get rid of that and make it only for American hybrids.

Who knows, the 2010 date might turn out to be right–the economy is due for a recovery. But I don’t know if now is the time to make those sort of projections, considering the unprecedented instability in our markets.

 

GM Hanging on By a Thread

Just weeks after GM officials were in talks to purchase Chrysler, it appears as if the world’s largest automaker is going down the tubes:

G.M. said its revenue in the third quarter declined 13 percent, to $37.9 billion, compared with $43.7 billion a year ago, on weak demand in its core North American and European markets.

Including the one-time gain, the loss was $2.5 billion, or $4.45 a share, compared with $42.5 billion, or $75.12 a share, in the quarter a year ago, a period that included a noncash charge of $38.3 billion on deferred tax assets.

The company also reported that it burned through $6.9 billion in cash during the quarter, and it ended the period with just $16.2 billion in cash reserves.

The rapid depletion of its cash position puts G.M. perilously close to dropping below the level needed to finance its operations.

G.M. said it had identified $5 billion in new actions to conserve cash, on top of an earlier plan to bolster its liquidity by $15 billion.

Still, G.M. said that it “will fall significantly short” of the cash needed to run its business in the first half of 2009 unless economic conditions improve and the company gets access to financial aid from the federal government.sdfa

The good news is that President-Elect Barack Obama appears to have the automaker’s interests in mind, mentioning them in his press conference as a critical part of the American middle class. At his side was Michigan Gov. Jennifer Granholm, who has been mentioned as a possible nominee for the supreme court in Obama’s administration.

Granholm is apart of Obama’s transistion team, and will likely be advising him on economic conditions in Michigan, where unemployment has hovered between 7.5 and 8.5 percent for the past several years.

I will stand by my previous statements: Obama’s election is fantastic news for Detroit. John McCain only showed an interest in the automakers during the Michigan primary when he was facing Mitt Romney, and the topic was a pretty moot point in the last two months of his campaign, when he suprisingly pulled all of his campaign staff out of Michigan.

Still, if GM has no capital, the city will suffer. President Obama, Governor Granholm and Mayor Cockrel (or his sucessor) will have to work very closely in 2009 and 2010 to prevent complete economic devastation in Metro Detroit.

 

Thoughts on Obama, Michigan, Economy

Not a shocker:

Deep concern over the economy and hope for change were dominant issues for Michiganders in choosing a new president.

Nearly two-thirds said the economy was their main concern, and 95% agreed that the economy is in poor or “not so good” shape in the National Election Poll, an exit poll for a consortium of news organizations.

The early poll results confirmed in dramatic fashion what polls and the national political discussion have revealed for weeks — economic concerns are the driving force in the presidential campaign and voters’ decisions.

Those who said they were “very worried” about the economy chose Obama by a 2-1 ratio.

Speaks for itself. I find it interesting people trust Obama/democrats more to deal with the economy. I wonder if it’s a hope that the days of Bill Clinton will come back. Sadly, I think George Bush has done enough damage where that will never happen in Metro Detroit.

But on a broader sense, President-Elect Barack Obama represents an actual chance to reform Detroit. An actual chance to give serious funding to green energy, which will create new jobs and bring more prosperity to a crumbling city.

Words cannot describe how thrilled I am.

 

From the Big 3 to the Detroit 2

Since Ford, GM and Chrysler are no longer the world’s largest automakers, the term “Detroit 3″ has become more common than “Big 3.”

But news this week says it may soon be the Detroit 2.

General Motors Corp. could swallow Chrysler LLC and end the Auburn Hills automaker’s 83-year existence under one scenario being discussed by GM and Chrysler’s owner, Cerberus Capital Management LP, said a source briefed on the talks.

…

Besides the Jeep brand and Chrysler’s minivans, the company has few assets of value to its bigger rival, he said.

I’ve always thought that Detroit would eventually just have one car company (GM) and that would be the end of it. It looks like that may be the way this is going, although I’m sure there are many in Auburn Hills that would like to keep it from happening.

GM would be losing a key competitor by doing this, so it’s probably a good move for them in that sense. The Jeep brand is probably the only major SUV brand that will remain popular if gas prices continue to hover between $3 and $4–and with gas falling, they may do even better.

And I would venture to guess that it’s better to have two companies working on a green car versus three.

But I can’t stress how much this could change Detroit. Thousands of people work for Chrysler HQ and at an enormous Chrysler plant on Detroit’s east side. Some would get jobs with GM, but the VAST majority would be out of jobs. Dozens of “Chrysler-Jeep Superstores” would close.

The Western Suburbs, where many of the high up Chrysler people live, would see more foreclosures of expensive homes that nobody can buy anymore, and the Northern suburbs would see thousands of foreclosures due to lost assembly line jobs. This could lead to instability even in Chase and Bank of America, Detroit’s two largest lenders, and the only two major banks in the U.S. that have remained stable through this economic crisis.

I’m torn. This could help save GM, which Detroit would be nothing without, but it could also lead to a mass exodus from the area and (further) economic instability.

I do not envy the people making this decision, nor the people who will have to deal with its consequences.

 

Freman Hendrix to run for Mayor

Fantastic news out of the Motor City today

Hendrix, who turned 58 today, said he plans to run in February’s special primary election for Detroit mayor, joining a half-dozen well-known candidates interested in leading Detroit after Kwame Kilpatrick’s resignation and criminal plea.

Hendrix said he will focus on three core issues: bringing integrity back to the office, beefing up the police force to thwart crime and re-establishing long-defunct community block clubs.

The man should have been elected mayor in 2005. He had the qualifications, the demeanor and the right attitude to lead the city.

He was one of the few in 2005 to stand up and call out Kwame on all of his shortcomings.

Don’t get me wrong, I have the utmost respect for Ken Cockrel and how he has handled the situation with Kwame. But he is not a strong enough or experienced enough figure to lead the city right now. His place should be on the city council as president, and quickly before Monica Conyers can screw things up.

Right now I’d say the other major candidate is David Bing, businessman and a NBA star for the Pistons from 1966-1975. The man is out for his own interests. He lives in the Western Suburbs but bought an apartment in Detroit last year with the idea to run for mayor against Kwame in 2009. He sees February’s special election as his chance to get in office.

UW on Detroit fully endorses Freman Hendrix in 09, and hopes he doesn’t lost in the muddled field of candidates.

On an even more personal note, I’ve actually had the pleasure of meeting Hendrix. It was at the state capitol in Lansing in the spring of 2006–I was there for a journalism conference and he spoke with me and a few friends about the effect the Super Bowl had on Detroit.

He was funny, intelligent and well-spoken–he practically demanded respect, something, I have to say, Kwame Kilpatrick never did in the handful of times I’ve seen him speak or seen him rolling into Starbucks with his entourage.

Remember, whoever is elected to office in February will have to run again in the November 2009 general election due to a mix-up with the city charter, so in theory, Detroit could have 4 different mayors (Kilpatrick, Cockrel, February winner and November winner) in a 16 month period.

Welcome to Detroit politics.