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Auto Industry: Tough Love
From MSNBC: Well, it looks like President Obama is imposing some tough love policies on the auto industry. I think he is handling a challenging situtation very well, given the circumstances and ramifications. I'm curious as to how you all view this and what do you think will be the general public response to this?
WASHINGTON - President Barack Obama refused further long-term federal bailouts for General Motors and Chrysler, saying more concessions were needed from unions, creditors and others before they could be approved. He raised the possibility Monday of controlled bankruptcy for one or both of the beleaguered auto giants.
At the same time, eager to reassure consumers, Obama announced the federal government would immediately begin backing the warrantees that new car buyers receive — a step designed to signal that it is safe to purchase U.S.-made autos and trucks despite the distress of the industry.
In a statement read at the White House, Obama said he was “absolutely committed” to the survival of a domestic auto industry that can compete internationally. And yet, “our auto industry is not moving in the right direction fast enough,” he added.
The market reaction isn't good - down 275 as of 1:25pm. However it seems that reaction from analysts are mostly positive as it signals that the WH is on top of this situation.
As for general consumer reaction? I am willing to bet not many people are paying that close of attention unless perhaps they are in the market for a new car.
Personally, I am withholding judgment until it is all said and done but I like that Obama is taking this seriously and letting GM/Chrysler know that they better come up with great not just mediocre plans to resolve their deep issues. I am also a fan of how Obama expects everyone involved, management, bondholders, and the union to take it on the chin to move forward.
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It's sad that we've reached a point where 'government service' is a dirty word... If we're the greatest country on earth, maybe we can have the greatest government.
Lewis Black
Yes, market reaction is no surprise really. As we all predicted, the market will be up and down for awhile and days like this can be painful. Santelli should be careful not to blame Obama for today unless he is ready to praise him for a strong market on another day-which is doubtful for him to do.I think we all agree that it makes no sense to hold Pres. Obama solely responsible for the market-on good days and bad.
I think Pres. Obama has a handle on the situtation and almost has to act like a good CEO-what's best for the company in the long term and it's stockholder? (the American taxpayer) These are not always easy choices.
I could be way off but I think the idea is that the auto industry may need to focus on a few of their best models and phase out those that are not profitable is the key. Also, environmental stardards must be part of the plan to be more competitive and forward-thinking. Pres. Obama seems to think that "structured" bankrupsy is a viable option for GM if they don't come up with a sound plan. I was surprised that only 18% of the public support further bail-outs for the auto industry, knowing that so many jobs are at stake. I think people would be willing to support them IF they could show potential and most people don't see that potential at this point. Why throw money at a problem that won't be fixed?
The main criticism I've heard is that Obama was quick to "fire" an auto industry CEO but why not some of these bank CEO's? Gibb's response was that each company is looked at on a case by case basis. Not sure if that answer will satisfy everyone.
The auto industry has been in trouble for a long time. Under Clinton when it was time for them to choose between energy effecient cars or gas guzzlers they chose the latter and the Hummer and the Escalade et al were born.
During the Bush administration things got worst but Bush was too busy spending money in Iraq to bother. Now we have to face it and make some tough choices.
Chrysler has a harder time because they are mainly a North american company....as opposed to GM who is still big in Europe and even bigger in CHina...
The restructure demanded is from bigger to smaller environmentally friendly cars or better mileage.
Though choices that we can no longer avoid.
I will not throw the first punch but I wil certainly throw the last.....President Barack Obama.
Everything you said, Ind, is quite spot-on. I would add to that the surge in oil prices early-to-mid 2008 "shocked" the country.
Really? No one -- even the AUTO INDUSTRY -- saw that coming? The surge of population and newly-minted middle classes in India and China didn't signal to the auto makers that oil might face a surge in demand that would impact oil demand, thus driving prices up, and consumers begging for alternatives? Toyota and Honda seemed to grasp that concept, and have been perfecting fuel-efficient vehicles for the past 25 years.
As for banks it is an entirely different story. Commercial banks -- for the most part -- were doing fine until they were forced (coerced? nudged? cajoled? by the Treasury) into buying the companies riddled with toxic assets.
Here are some reactions from the Hill (from MSNBC First Read.) Not shocking that some (not all) Republicans were standing ready to criticize no matter what Pres. Obama came up with.
...On the Republican side, Rep. Darrell Issa, a ranking member of the House Committee on Oversight and Government Reform, praised Obama's announcement saying he had "struck the right chord in seeking balance between supporting the American auto industry and calling for a much-needed restructuring of GM and Chrysler."
But the response was not all positive. Senate Minority Leader Mitch McConnell released a statement arguing that Republicans had long been pushing for reform in the auto industry.
"Republicans in Congress called for true reform before bailouts last year; automakers were given billions instead," McConnell's statement read in part. "Republicans said that taxpayer money set aside to strengthen the economy by preserving the flow of credit shouldn't be used for bailouts of individual businesses and unions; it was doled out anyway. And Republicans called for an end to funding enterprises that refused to demand reform from management, labor and investors; each refused."
McConnell ended by saying Republicans agreed with the notion that reforms must "be taken seriously or the taxpayer bailouts will end" but that that should have happened "tens of billions of dollars ago."
Tennessee Republican Bob Corker, a member of the Senate Banking Committee who took part in negotiations on legislation to help U.S. automakers in December, said Wagoner firing was a "sideshow" meant to distract people from what he called the lack of progress made since aid first went to automakers last year and cast the administration's moves as a "major power grab" and a threat to free enterprise.
"With sweeping new power the White House will be deciding which plants will survive and which won't, so in essence, this administration has decided they know better than our courts and our free market process how to deal with these companies," Corker said in a statement.
And on the Senate floor, John McCain called the Administration's removal of GM CEO Richard Wagoner "remarkable" and "unprecedented," and suggested it would have a chilling effect of other corporations. "So instead of sending General Motors and Chrysler into the pre-packaged bankruptcy they deserve, now have taken the unprecedented step of firing the CEO of General Motors," he said. "A remarkable move by the federal government. I think unprecedented in the history of this country."
"What does this signal send to other corporations, financial institutions?"Unprecedented? Really? Big corps come to us begging for money because they're idiots, and we ask in return for them to chuck their idiots-in-chief as part of a restructuring deal. Isn't that how it works, Senator? Our money, our rules?
----It's sad that we've reached a point where 'government service' is a dirty word... If we're the greatest country on earth, maybe we can have the greatest government.
Lewis Black
Airtalk on KPCC was covering this same topic.
The upshot that I took from it was that the two industries were sufficiently different that different approaches were necessary.
GM and most all of the auto industries in the world are right now overstocked, and have too many factories on line for the demand. I would think that that would mean the only way out would be through bankruptcy.
Looking at McConnell's above critique, wouldn't that be aimed more at Bush than Obama?
The auto industry is much different than a banking institution. I guess they need to work on articulating/explaining that better.
And his not-so-subtle reference to the phrase "too little, too late" isn't helping anyone. He's still acting like a spoiled child.
----It's sad that we've reached a point where 'government service' is a dirty word... If we're the greatest country on earth, maybe we can have the greatest government.
Lewis Black
I think it's great -- not only has he forced the executive branch into the "discussion" but he's left it out of the hands of Congress to some degree which once it gets there we would end up with something like we have with TARP, yet again.
I do find it amazing that the the worker that the news media has been talking to are adamant about not giving back any more wages. These fellas are gonna go down with this ship if they don't get their heads outta their arses. While workers don't have responsibility for the direction of the company management wise, they ARE responsible for quality and lets face it, when you spend that much money for an auto, you don't want it to feel like the exterior/interior belongs on a kid's playground Tonka truck or worse, it drives like a coffee can on wheels.
^^^^^^^
Golf11, NYC
Vero Possumus
From TPMuckraker, Neel "Mr. Opacity" (or "Mr. Ferrari" if you go with Gawker's notes) Kashkari faces the wrath of Congress. This time, the White House isn't going to stand behind him (I think). Edit: Whoops, that's from last December. Some leaked emails says he was really sweating then; Fox (blech) Business managed to snag a heavily-redacted pile of documents from the Treasury, which points to the sheer silliness of how Paulson's Treasury handled the first bank rescue...
----It's sad that we've reached a point where 'government service' is a dirty word... If we're the greatest country on earth, maybe we can have the greatest government.
Lewis Black
I can think of no better incentive for corporations to succeed than the knowledge that requests for bailouts will be taken as an admission of corporate failure and subsuming of management functions by the government.
As David Brooks (conservative columnist) of the NYTimes brilliantly pointed out,GM has been in the "restructuring business" for thirty years. They more or less stopped making marketable cars. That has been a side business to company reorganizing... and it shows
Obama cannot publicly express the kinds of doubts I HOPE he harbors about his approach. These are, after all, very big risks. But I support the focus, goals, and most of the mechanisms he is employing in tackling the economy. (He can show disturbing flashes of messianic arrogance, at times. It is my hope that Michelle will box his ears if/when he does.).
I do, however, join with others still smarting over Bush, Obama, Paulson, and Geithner's bi-partisan EZ pass on insurance and bank execs. When do those Bozzos start walking planks?
To be totally honest, I have no problem with the government telling a government funded company what to do with taxpayer money! If you get taxpayer dollars, you have to answer to the people the taxpayers elected, or appointed.
That being said ...........
My problem is ..... WHAT FRUITING BUSINESS DOES THE FRUITING GOVERNMENT HAVE IN THE FRUITING PRIVATE SECTOR TO BEGIN WITH!?!?!?!?!?!?! Where in the Cinstitution does the Govt derive its power to give bailouts to the private sector?
What if none of my interests are in AIG? Why should my tax dollar go to them?
What if I hate GM or Chrysler products? What if I like FORD? Why should a single tax dollar of mine go to help Chevy? Or Plymouth?
Can't I decide with my wallet what companies fail, and which ones succeed? Cant WE, as a nation, decide what we like and dislike? What if the entire country hates Chevys? Is the Government gonna say we need to save them? This is ridiculous. I need to post the Constitution for all of you to see. Perhaps it has been a while since you read it. But you need to cross reference the Constitution and the US Governments actions and see the atrocities committed against our founding documents on a daily basis!
RF: I, for one, am extremely familiar with the document, and I, too, am outraged by the bailouts.
However, I hope you're not putting all the blame on President Obama.
I wonder where your outrage was during the Bush administration -- for oh, so many atrocities against our Constitution.