Autoblog

Much ado was made about the Big 3 CEOs choice of travel to Washington D.C. this week. Each one flew to our nation's capital in separate private jets, a fact that was mentioned by many politicians during two days of testimony before Congress. While it's this blogger's personal opinion that politicians took the opportunity to grandstand a bit too far on this point, nevertheless, it was a boneheaded move by the Big 3 that they should've seen coming. We've learned today that fewer employees will get to fly the friendly skies in one of General Motors' corporate jets, as the automaker has announced it will be ridding itself of two. That will cut down the current corporate fleet of leased jets from five to three, and an additional two were gotten rid of last September. In addition to dumping the G5s, GM is also cutting half its air travel staff and restricting all forms of employee travel to slow the rate of cash its burning through each month, which in the third quarter reached $6.9 billion/month. Thanks for the tip, Aaron!

[Source: CNNMoney.com, Photo by Chip Somodevilla/Getty]

Drumroll please! The most stolen vehicle in Japan is... the Toyota Hiace van! Bet that wasn't your first guess. The lowly Hiace has been creeping up the charts since 2005 when it was barely in the top ten. A year later it was fifth with a bullet. Now it's number one and not looking back. Scofflaws' taste for this workman van seems insatiable, and thefts of SUVs and luxury cars have dropped as a result. That's probably more to do with the anti-theft devices on those vehicles, which may have caused theft rings to target vans such as the Hiace instead because they usually don't have immobilizers or the like. After thieving the vans, they generally chop them up and ship them to developing countries in Asia, the Middle East and Africa. That's where Hiaces often show up as taxis, buses, or utility vehicles. Hiace engines even show up in fishing boats from time-to-time. Thanks for the tip, catgirlshyla!

[Source: Japan Probe]

While there is definitely a huge rift between those who favor a Detroit bailout and those who would rather see the Big 3 fade away, you'd think that someone like Flint-native and documentary maker Michael Moore would be all in favor of helping the Big Three succeed. After all, Moore rose to fame for his first documentary entitled "Roger and Me" that featured then-CEO of General Motors Roger Smith. According to this piece in the Detroit News, however, Moore doesn't profess unconditional support for a Big 3 bailout. It seems he has mixed feelings about the whole situation.

Moore was on Larry King last night saying that the automakers ignored the wishes of consumers by continuing to build bigger vehicles just to maximize profits. Foreign automakers, on the other hand, built SUVs and more fuel-efficient vehicles in other categories. Moore elaborated by saying that
the current managers don't deserve a dime, but that it would be terrible if so many people lost jobs because of them. He went on to suggest that Congress should demand change for any money given out, including building up alternative fueled vehicles and mass transit in the country.

[Source: Detroit News]

Wow, what an amazing piece of political theater that just went down. As we reported, four senators from auto producing state (two Democrats and two Republicans) led by Michigan Senator Carl Levin have reached an agreement on a compromise bailout bill for automakers. They were set to announce details of the compromise bill at 2:30PM, but before they could, a team of Congressional Democrats led by House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid walked into the room in which the press conference was to be held and announced that they didn't support the compromise bill and that CEOs of the Big 3 would have to come back after the Thanksgiving holiday and present a plan on how any loans that might be given would be used.

Back to that compromise bill. The big stalemate, other than whether U.S. automakers should get a bailout at all, is where the money would come from. Democrats want to take $25 billion from the $700 billion bailout fund for financial institutions while Republicans and the White House want to re-appropriate $25 billion in loans that have already been approved for investments in green technology. Levin revealed the compromise to be a version of the Republican's plan, with concessions made to Democrats in that certain environmental restrictions would remain in tact and that loan repayments would go directly back to replenish the $25 billion fund for green investments.

What do we take away from all this? The Big 3 will get no assurance of federal aid before Thanksgiving, and there's still no guarantee they'll get help after the break. The ball is again back in the court of the Big 3 CEOs, who need to show up in December with detailed plans of how each would use any federal aid. The Democrats are calling for "accountability" and "viability" in their proposals, which are due to Congress by December 2.

CNBC is reporting that four U.S. senators have reached a bipartisan agreement on a bill to help the Big 3 automakers in Detroit. Those senators include Michigan Democrats Carl Levin and Debbie Stabenow, Ohio Republican George Voinovich and Missouri Republican Christopher Bond. Details of the bill are not yet available, but a news conference is scheduled for 2:30PM EST, at which time we should learn more. It will likely be some compromise between the Democrats' wish for taking an extra $25 billion out of the $700 billion financial bailout fund and the plan supported by the White House that would allow automakers to use the already approved $25 billion in low interest loans for anything they wanted rather than just investing in green technology.

Still, CNBC says the bill faces some big procedural hurdles, not the least of which is that senators want to go home soon for the Thanksgiving holiday. Trying to squeak in a vote before the break will be tough, and lawmakers may have to reconvene in December to vote on the bill. Plus, there's no guarantee the House of Representatives will pass it even if the Senate would.

Regardless, Wall Street seems pleased with the news as shares of General Motors and Ford have jumped, with the latter hitting as high as $4 after ending the day yesterday at $2.79.

Stay tuned, we'll bring you all the details on the new automaker bailout bill when they become available. Thanks for the tip, everyone!

UPDATE: Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi have held a press conference in which they said that the compromise agreement reached by the above senators would not be approved, and instead that Congress will come back in December and hold more hearings with the CEOs of the Big 3. Each automaker has been charged with the task of showing "accountability and viability" at this second round of hearings, specifically telling Congress exactly how they plan to use any bailout money they might be given.

UPDATE 2: For details on the compromise bill, click here.

[Source: CNBC]

There have been so many different arguments for why The Detroit 3 should or shouldn't get a bailout that we could make a casserole out of them. One argument against a bailout -- or at least, a reason for the futility of a bailout -- that we don't recall hearing yet is "vehicle density."

The argument is put forth by Anthony Mirhaydari at MSN Finance. Basically, he says that with 981 cars per 1,000 people of driving age in America and new cars being sold faster than used ones are taken out of service, there simply isn't enough room for U.S. auto makers to sustain the volume of sales necessary to avoid factory closures and layoffs.

As an argument against the bailout, though, we find it tenuous. No one is saying that Ford, GM and Chrysler won't need to cut a lot of fat whether or not they get bailed out. But the bailout is to aid the survival of the companies at all, not to prevent layoffs and shuttered factories, which, again, will happen with our without money. According to Mirhaydari, Detroit's only option is to go forth and colonize other markets. Well, except for Chrysler, because "Chrysler as we know it will cease to exist very soon."

[Source: MSN]

Mitt Romney, former Massachusetts governor, former entrant in the marathon to win the White House, and current automotive industry expert (who knew?) had a few things to say in the New York Times today on the potential auto industry bailout. The opening paragraph says it all: "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."

Romney is not rooting for the end of the biz, but he believes that bankruptcy is the only way to save it because it will force a reset, and that will be the only way for the Detroit 3 to rectify entrenched structural problems. These include UAW contracts -- "a new direction for the UAW," executive perks -- "sanity in salary and perks," getting rid of old blood -- "management as is must go," just for starters.

Romney believes that the auto industry is crucial to America's national interest in more ways than one. And he isn't against helping the U.S. automakers, but believes that a shock to the system is the only thing that can rescue it, long term. Have a look at the piece and let us know what you think -- but no need to make a decision yet; give it another few minutes, and we're sure someone else will have another prescription. Thanks for the tip, Mike!

[Source: New York Times, Photo by Mario Tama/Getty]

Chrysler still makes cars? Apparently so, and CEO Bob Nardelli was on Capitol Hill yesterday with his colleagues from Ford and General Motors, warning that the Pentastar is in serious danger of exhausting its reserves by early 2009. Chrysler's share of the $25 billion in aid the automakers are asking for stands at $7 billion, though at the current rate, that money wouldn't last long, possibly about one fiscal quarter. Senators are concerned that the automakers will turn into a monetary black hole, but the Detroit CEOs are trying to plead the case that securing some federal help will make it easier to emerge out the other side of this downturn.

Nardelli did pledge to accept a $1 per year salary if it would help sway those with the purse strings. It would have been nice if he'd made that pledge to help his company and workforce, instead of it just being a token gesture to help him pick the pocket of the American taxpayer, but the $1 salary, which mimics what Lee Iacocca did during Chrysler's last near-failure, may play better than Alan Mulally's concern over a potential retention problem if the management is actually held accountable. Rick Wagoner divulged that he'd cut his salary by half. We think CEO salaries of a buck are fair - shoot, you can still afford a PT Cruiser on that pay.

[Source: Automotive News - sub. req'd]

So here's a breakdown of what's going on in Congress concerning federal aid for U.S. automakers. A Senate bill expected to be voted on this Thursday would expedite funds for Ford, GM and Chrysler so that they could actually get the cash they need within 22 days after the bill becomes law -- should the bill become law. The $25 billion loan, paid back at an initial rate of 5-percent, would come out of the $700 billion bailout fund for financial institutions. The Senate's stipulations would be that the government receives "stock warrants or senior debt instruments to the government," similar to actions taken with banks that accessed the $700 billion. As well, top executives get no big payouts and stockholders get no dividends.

The rumblings on the track indicate that unless the folks in favor can change a lot of minds before Thursday, the Senate bill has little hope of passing. That makes it even more unlikely that a House version of the bill would pass, since it has even stricter requirements. The House bill would also get money for the automakers quickly, but would establish a Financial Stability Oversight Board that would have veto power over any auto company action that would cost more than $25 million. Who would be on that board and how would they be chosen? Who knows.

Latest word is also that the White House doesn't want to take money from the $700 billion bank bailout and use it for the auto industry. It would rather speed up disbursement of the $25 billion in low interest loans that was already approved for research into more fuel efficient vehicles and let the automakers use that for their current cash needs. The White House also wants, and the Senate bill requests, that Ford, GM and Chrysler give the Treasury "a detailed plan on how the government funds requested will be utilized to ensure the long-term financial posture of the company." Cue the dramatic music, some maniacal laughter and the late Vincent Price intoning: the plot thickens.

[Source: Automotive News - sub. req'd]

Organizers, fans and media alike were shocked when the news broke that Formula One Management and the FIA had canceled the perennial Canadian Grand Prix, but the prospect remained open for local officials to renegotiate the contract. We're disappointed to report, however, that those prospects have now all but completely dissipated, as negotiations between the sport's commercial rights-holder Bernie Ecclestone and representatives from the Canadian federal, Quebec provincial and Montreal municipal governments have broken down. And everyone's fingers are pointing at Bernie.

According to Montreal mayor Gerald Tremblay, Ecclestone put forward an outrageous proposal extorting exorbitant multi-million-dollar fees from the race organizers, who receive backing from the three levels of government. The Canadian representatives then began considering levying a new tax over local hotels to cover the cost and planning to establish a non-profit organization to come up with a fiscally sound counter-offer, but even those prospects were completely shut down when Ecclestone stated his refusal to budge from his terms whatsoever. And so, with the US Grand Prix still out of the running – for the time being, at least – the top level of motor racing has completely abandoned North America altogether.

[Source: Autosport | Image: Lluis Gene/Getty]