THE G.O.P. LOADED THE GUN BUT THE U.A.W. PULLED THE TRIGGER

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The “Car Czar” loan bill is dead. And the official General Motors death watch begins.

Why did this have to happen?

Perhaps because Alabama Senator Richard Shelby and the United Auto Workers’ Ron Gettelfinger are in a pitched contest for the title “Dumbest Man in America.”

Advantage: Gettelfinger.

The U.S. Senate defeated the last legislative hope to save the Detroit 3 from the crisis that the Federal government mostly created because (a) Shelby’s Republicans wouldn’t agree to a short-term fix without a “short bus” full of “poison pills” (if at all) and (b) Gettelfinger’s myopic U.A.W. took the bait by refusing to concede to market-based wages and benefits before 2011.

The U.A.W.’s intractability on “givebacks” stoked the “Shelby-can’ts” argument that the Detroit 3 lack long-term viability like a steam engine on liquid oxygen.

Clearly, the U.A.W. would rather play “chicken” with a federal bankruptcy judge than do anything to help G.M. survive its 101st year.

The U.A.W.’s refusal to see reality has probably doomed thousands of American jobs and has put the U.S. economy on the brink of depression. But perhaps Gettelfinger’s troops would rather lose their jobs than take “common-sense” pay and benefit cuts that would bring the Detroit 3's costs in line with the Japanese invaders plants.

The U.A.W. failed to support their “pattern contract” level of benefits in the marketplace by failing to unionize the Japanese invader plants.

The U.A.W. failed to help the Detroit 3 become competitive when many believed that “Team Japan” was gaining the upper hand in a not-so-free trade world.

The U.A.W. resisted efforts to make the Detroit 3 plants run more like the Japanese invader plants and resisted reasonable restructuring proposals

The U.A.W. failed to make the case for buying American to the general public, allowing the Consumer Reports “appliance motoring” mentality to take hold and causing the loss of an entire generation of consumers to Japan.

The U.A.W. failed to rally a skeptical, “bailout weary” electorate to the essential defense of America’s most basic industry. Unlike banks – which take a pot of cash and a handful of elite M.B.A.- types trained in banking to replace – a complex, industrial colossus such as General Motors requires years and a massive, almost cost-prohibitive undertaking to replicate. And while Congress threw $700,000,000,000.00 to “save” the financial industry, The U.A.W. failed to persuade the political system to invest a paltry TWO PERCENT OF AS MUCH to help the Detroit 3 cope with the worst credit and sales crisis since the Great Depression.

Now the U.A.W. has failed to understand that in a “war” against the government-subsidized, predatory Japanese invaders, sacrifices are necessary. Instead they basically chose to “strike” any hope for keeping the Detroit 3 intact and alive to fight on when economic conditions improved.

To be sure, GM made plenty of other mistakes: Killing off brand autonomy . . . weak small car offerings in the 1970s and early 1980s . . . too much “badge engineering” . . . too many fleet sales . . . not enough “fight” in the entry-level and youth markets . . . not enough “continuous improvement” . . . accountant-driven cost cutting and delays in product cycles . . . not realizing soon enough the public relations benefits of the money-losing EV-1 and hybrid electrics . . . not continuing to boost efficiency even as fuel costs abated in the 1990s . . . sacrificing leadership in styling, design and technology on the altar of conservative quarterly returns . . . promoting too many bean counters and not enough “car guys” . . . not adapting well enough to the huge regulatory burdens assessed by Congress and the states.

It’s a death by a thousand cuts – some of them self-inflicted. Most of them caused by meddling Federal policies.

But GM's biggest mistake was in believing that the U.A.W. and Congress would come to their collective senses when it counted most.

Now only George W. Bush has the last clear chance to avoid the burning down of the American auto industry in Chapter 11.

Will he act in time?

IS THE REPUBLICAN ALTERNATIVE RESCUE PLAN FOR THE DETROIT 3 AN OLIVE BRANCH OR A LOGJAM?

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The G.O.P. has finally shown up with something other than chanting Senator Shelby's "Let'em fail" mantra. Some may see this as a positive sign . . . an olive branch. But what of the details?

GOP Leaders Propose American Automotive Reorganization and Recovery Plan

The Democratic Bailout proposal has three fundamental flaws:

• The only thing crazier than trusting the same management and union officials who got the Big Three into this mess to get them out is trusting a bunch of Washington politicians and bureaucrats – the very same people who ran up a $455 billion deficit last year. American auto workers and their families deserve better.

• If no private investors believe the Big Three restructuring plans are realistic enough to support with their own money, why should we put up taxpayer money? American taxpayers deserve better.

• The Big Three restructuring plan and the Democratic proposal lack accountability. There is no guarantee that once they get taxpayer money the restructuring they promise will occur. Once the taxpayers prop them up once, there will be a big incentive to keep bailing them out – keeping the industry dependent on government aid, lashing it to the majority’s political agenda, and further denying American auto workers the security of a viable industry that is back on its feet and ready to compete. American auto workers and their families deserve better.

What We Should Be Doing: The American Automotive Reorganization and Recovery Plan

Hard Benchmarks:

On December 2, the Big Three presented to Congress their plans for restructuring. While the plans included laudable goals, too few details were provided as to how the companies will actually achieve the restructuring and the savings they have promised. In some instances new agreements to achieve the savings would not be entered into for months or perhaps years.

The Big Three must lock in the restructuring they have promised in a matter of weeks, not months or years. Congress should instead establish firm benchmarks and a tight timeline for restructuring. Such benchmarks will include for example requiring that by March 31, 2009 each company should reach agreement whereby:

• The companies’ creditors agree to a framework to reduce each company’s indebtedness by at least 1/3.

• The UAW holds to concessions already made and further:
o Concedes the elimination of Supplemental Unemployment Benefits;
o Concedes elimination of the Jobs Bank Program;
o Agrees to either reduce company retiree health care obligations or otherwise convert a portion of such obligations into equity; and
o Agrees to reduce wages and benefits to the levels paid by non-Big Three manufacturers.

A Process for Reaching Expedited Agreement, Instead of Nationalizing America’s Auto Companies

Because of the many legal and contractual hurdles to restructuring, the companies are urged to accomplish their restructuring through the use of a pre-packaged bankruptcy or another mechanism to bring all stakeholders to the table for an agreed-upon determination of their future. It is important that these stakeholders reach reasonable compromises amongst themselves. Creating a government bureaucracy or a “car czar” to arbitrarily pass judgment on the thousands of details involved with a restructuring is akin to nationalizing the auto companies.

Interim Financing: Insurance, Rather than a Taxpayer-Funded Bailout

The Big Three may need some form of interim financing as they finalize their restructuring. In normal economic times, if their restructuring plan is considered viable, such financing should be available in the private market. Because of the current credit crisis, limited assistance may be appropriate in the form of insurance, rather than a taxpayer-funded government bailout that replaces private investment. We propose that the government provide insurance, funded by the participants with a modest FDIC-like fee, which would cover up to 50% of the losses of new investment in the case of default, helping to unlock immediate private investment (not unlike debtor in possession financing). Such insurance would expire on March 31, 2009. This proposal ensures that taxpayers are protected and provides a powerful incentive for the Big Three to quickly implement their restructuring plans.

Although some of the more onerous provisions of the OBAMAcrats' rescue plan are apparently dying (i.e. the ban on automaker lawsuits against state-level emission regulations), the emergence of the GOP counter-proposal indicates that a rescue of the Detroit 3 is far from done.

The GOP plan -- which may not even have the support of all GOP legislators -- probably has enough poison pills to prevent passage. Certainly the OBAMAcrats will do the bidding of the U.A.W. long enough to pass the ball into the upcoming OBAMAcrat Congress. But could GM and Chrysler hold on until then?

If the GOP plan were to pass, could any of the Detroit 3 meet all of the benchmarks in less than one quarter? And under the current credit crunch, would a 50% guaranty be sufficient to move billions in private capital into emergency loans for the Automakers?

While the GOP plan tries hard to avoid the dreaded "bailout" label and sidesteps some of the "nationalization" provisions of the OBAMAcrat plan, its viability -- both politically and operationally -- is questionable.

Thus, it seems that the GOP plan is merely a political cover play calculated to permit the few remaining auto state Republicans a safer vote. It will likely be used by those opposing any help in cleaning up the mess government created as a logjam to any emergency relief.

It is unclear whether the OBAMAcrats even have enough votes to choke off a possible filibuster.

It is certainly shaping up to be a long, cold December for General Motors and Chrysler.

POLITICAL OVERREACHING IN THE DETROIT 3 LOAN BILL

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According to a report in the Wall Street Journal, the liberals are piling on draconian conditions to the Detroit "bailout" bill.

Not only are the liberals demanding a substantial equity stake in any company that partakes in the loan fund and an "Auto Czar" to micromanage how the loan funds are spent, but they apparently intend to heap the bill with noxious environmental language:

"One danger for auto makers is exposing the industry to congressional meddling as it attempts to build a new business model. The legislation, among other things, would bar the companies from participating in legal challenges to state laws designed to impose limits on greenhouse-gas emissions. The White House opposes that provision, congressional aides said.

The big three would have to analyze whether excess production capacity could be used to make trains and buses for public transit authorities."

These provisions are an unnecessary and dangerous diversion from the helping the Detroit 3 cope with the storm of unfunded mandates, market meddling, and economic collapse generated by decades of Washington's ham-fisted interference in the Detroit 3's business.

Truth With Speedzzter has previously written extensively about the danger of state-level anti-carbon litigation. See e.g. "Automakers Win One in California"

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EPA HACK (MARGO OGE): BACK TO THE DISMAL '70s AGAIN

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Now Congressional liberals seek to "cram down" their vision of forcing all Americans into unsafe, low-performance 60+ m.p.g. microcars (or government-run, taxpayer subsidized mass transit) by holding an economic gun to the heads of Chrysler and General Motors.

Even the United Auto Workers is poised to pile on. As a compensation for the "haircut" that the Detroit 3 loan legislation will require, the UAW wants more control over the Detroit 3's operations.

"[T]he United Auto Workers union is seeking to attach strings to any concessions it makes for the Big Three. Marc McQuillen, president of UAW Local 2404 in Charlotte, N.C., said the union is looking for an equity stake in GM and likely a seat on the company's board."

All of this will hammer GM's current shareholders by dilution. However, the liberals know that the alternative for shareholders in bankruptcy is even worse. Shareholders typically stand last in line in bankruptcy.

IS THIS THE BEGINNING OF THE END FOR FACTORY INVOLVEMENT IN MOTORSPORTS?

If the greeniac liberals seize control of Chrysler and GM, the portions of the automakers important to motoring and motorsports enthusiasts may be axed in a "brave new world" of government-run automaking. It is unlikely that a de facto nationalization of GM and Chrysler will continue "marketing" or "support" for a vast panopoly of enthusiast and motorsports activities.

The articles of the liberal Greeniac faith are opposed to most of the bedrock principles of automotive choice.

"Nobody needs a car with more than 200 horsepower."

"Almost nobody needs a truck or an SUV."

"V8s are irresponsible gross polluters."

"We MUST double fuel economy standards for the good of the country."

"We need fewer highways and more public transportation."

"We need to keep fuel prices high to break our 'addiction' to oil and cut carbon emissions"

"We need to 'recycle' (scrap) old cars and 'encourage' ownership of new 'green' vehicles.

Truth With Speedzzter had previously predicted the end of the Second Supercar Era.

But the Detroit 3 loan legislation is shaping up as not as a gradual return to the automotive dark ages of the 1970s (this time in even more regulated government-designed motorcars), but a sudden cataclysm that will wipe out a good portion of OEM motorsports.

Most certainly, ordinary working Joes need not apply.

Of course, a few rich guys will still trade impossibly expensive rides at Barrett-Jackson. But what, if anything, that's left of genuine high performance will be so limited in supply and so expensive that ordinary high performance auto enthusiasts would have to live in their cars to afford one.

Don't believe it?

According to Barack Obama's campaign website, "Obama will double fuel economy standards within 18 years."

Apparently, that means that he supports an increase in the Corporate Average Fuel Economy Standard from the recently-enacted 35 miles per gallon to SEVENTY miles per gallon! (Even if Obama merely wanted to "double" the old CAFE standard, he'd be imposing by big government mandate a FIFTY-SIX miles per gallon average on all light vehicles sold in the United States of America)

BUT WITH LIBERAL STATE ATTORNEYS GENERAL PERMITTED UNFETTERED ACCESS TO THE LIBERAL COURTS TO RATCHET UP "LOCAL" STANDARDS, OBAMA'S MISGUIDED CAFE TARGETS MAY BE THE "BEST CASE SCENARIO!"

Such radical fuel economy proposals would plunge the world of high-performance and sports cars into an age of banishment far worse than the "dark ages" of the 1970s.

A tiny three-cylinder turbo diesel would be the "Shelby GT 500" or "Dodge Viper" "musclecar" of the Obama age of government-controlled motoring.

If auto enthusiasts still remain skeptical of the liberal OBAMAcrats intention to destroy all semblance of automotive freedom in America, Obama's next proposal ought to remove all doubt: "Obama supports implementation of a . . . system to reduce carbon emissions by . . . 80 percent below 1990 levels by 2050."

Such a "system" would undoubtedly target the new and used parts supplies for keeping "classic" and "special interest" motorcars on the road (if not the vehicles themselves) as energy-thirsty industries sought to "offset" industrial uses of power through "cap and trade" deals. Chevron's infamous car crushing program of the early 1990s is just a harbinger of what's sure to follow if "President Obama" attempts to roll back energy use to EIGHTY PERCENT LESS than 1990.

The automotive aftermarket won't go unscathed, either.

Energy conservation standards will likely be expanded to stop "tampering" that potentially increases greenhouse gas emissions. In other words, huge swaths of bolt-on parts could be regulated out of existence.

Many smaller aftermarket companies and shops will see huge tax increases and other expensive mandates which will be passed along to a shrinking customer base as higher prices.

Fewer new OEM performance cars will mean lower demand for hop-up parts. Reduced sales volumes will mean higher prices, less selection and slower product development times.

The Detroit 3 loan legislation is the "Trojan Horse" the liberal Greeniacs will apparently use to "burn down" what's left of automotive freedom in America.

Yet what choice do GM and Chrysler have. If they don't go along, they will run out of money and die in bankruptcy.

Today is a horrible day for automobility in America.

Still, some manage to find spots of humor amid the chaos.

Turbo Ted on the Car Craft Magazine Forum made these observations a few days ago:

The first time the Detroit 3 suits private-jetted to Washington, they only wanted a $25 Billion loan from us taxpayers.

But the dog ate their homework and they were sent packing until they came up with a new "plan."

But this time, after kickin' back over Thanksgiving with some turkey and another thrilling DETROIT LIONS LOSS -- and with their homework in hand -- they "Americruised" into D.C., begging for $34 Billion!

Maybe Congress should have taken the first deal.

Or maybe this IS the first deal . . . after the "F&I" guys in the back finished adding on all of the extended warranties, Scotchgard (tm), paint sealer, window tinting, undercoating, pen-striping, credit life insurance, "gap" insurance . . . .

(That last joke is a lot funnier if you've purchased a new car at some point in the past couple of decades)

Or maybe it just costs a lot more to "road trip" to the U.S. Capitol than to jet in . . . . $34,000,000,000.00 will buy a lot of beef jerky, Big Gulps (tm), and Pizza Pockets**

**(A handful of long-time [Car Craft] readers (e.g. gray-haired, chronically-unemployed bums wearing "Foghat" t-shirts and "Members Only" "racing" jackets) will remember the infamous and ineffective "Pizza Pocket Cruise Control" from the CC Americruise days.)"

Of course, when this is all over, probably the only folks able to laugh will be the radical greens who are invading Detroit by force of law.

VOLVO CARS GOING CHINESE?

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Autoblog "3.0" is highlighting a Sunday Mail report that Shanghai Automotive Industry Corporation (SAIC) is the leading contender for the hand of FoMoCo's Volvo Cars operation.

Dumping Volvo may be a political necessity for Ford at this juncture. While Ford has benefitted from Volvo's safety technology, Ford's ownership of Volvo has not always been best for both companies.

Ford has become overreliant on rehashing Volvo platforms. The worst example of this is the failed "D3" platform. D3 Fords, such as the Ford Five Hundred/Taurus, Freestyle/Taurus X, and Mercury Montego/Sable have been market flops. They were unable to accept Ford's designed-for-FWD Modular V8 (back when larger engines were in vogue) and earned a justified reputation for stodginess. Even the lauded 3.5 Duratec wasn't enough to rehabilitate their bland, "corrective shoe" market image. Huge advances by Honda, Nissan and Toyota in the U.S. market occurred during the "failed watch" of the D3s. The D3s were the wrong cars at the wrong time.

Had FoMoCo used a better, more exciting European formula (BMW comes to mind), perhaps things would have been different. Instead, all Ford really proved was that Americans don't want Volvos, even if reskinned as Fords.

Some would argue that Volvo's reputation has become tarnished under Ford. That is probably not fair because Volvo was ill-suited to independently compete for a larger share of the "Euro-sedan" market against the cutthroat Japanese and Germans.

Now that Volvo has become a money loser for FoMoCo, perhaps spinning it off for a few billion is a decent move. Selling Volvo would close the chapter on the "Premium Auto Group" strategy and would force Dearborn to get back to the task of making "World Class" Fords, Mercurys and Lincolns.

THE CHURCH OF THE SUV . . . AND WILL WAGONER BE THE SCAPEGOAT?

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Pressure for Congress to act in time to save General Motors is apparently reaching heavenly heights. Detroit's Greater Grace Temple -- better known as the site for the funeral of civil rights icon Rosa Parks -- held a prayer meeting for the Detroit 3 on Pearl Harbor Day.

"'We have never seen as midnight an hour as we face this week,' the Rev. Charles Ellis told several thousand congregants at a rousing service at Detroit's Greater Grace Temple. 'This week, lives are hanging above an abyss of uncertainty as both houses of Congress decide whether to extend a helping hand.'"

"Local car dealerships donated three hybrid SUVs to be displayed during the service, one from each of the Big Three. A Ford Escape, Chevy Tahoe from GM and a Chrysler Aspen were parked just in front of the choir and behind the pulpit."

Some undoubtedly saw a bit of symbolism in that the stage which once held Rosa Parks' casket now holds what some may see as three emblems of the death of Detroit.

More than invoking Divine intervention, the Greater Grace Temple photo-op was likely intended to remind the OBAMAcrats to the centrality of auto workers to the left-center voter coalition that boosted Obama into power.

So far, the OBAMAcrats have produced nothing but tedious lectures, CEO humiliations and a homework assignment. Efforts at a broad solution apparently have stalled.

The developing Congressional aid plan merely seems to be an interim measure calculated to push the Detroit 3 credit crisis into Obama's first term. And the cost for the interim financing may just be the job of General Motors' CEO Rick Wagoner.

Wagoner's GM is approaching its sales and financial crisis with unexpected candor.


"'While we're still the U.S. sales leader, we acknowledge we have disappointed you,'" according to a new mea culpa advertisment from GM.

"At times we violated your trust by letting our quality fall below industry standards and our designs became lackluster."

"We have proliferated our brands and dealer network to the point where we lost adequate focus on the core U.S. market."

"We also biased our product mix toward pick-up trucks and SUVs." [Which, given Federal policy and market demand, was a necessity for survival]

All of this self-flagellation is probably not enough to save Wagoner's job. As the only one of the "insiders" left helming a Detroit 3 company, the OBAMAcrats and skeptical Republicans will likely have to make an example of him as "evidence" that Detroit has "repented" from its profligate ways.

Of course the politicians will not require the same level of "sacrifice" from Ron Gettelfinger or anyone in leadership at the U.A.W.

Maybe Wagoner's a praying man . . . .

Perhaps unintentionally, the prayers at Greater Grace Temple were offered on the 67th anniversary of the "Day that will live in infamy" -- Japan's premeditiated and heinous slaughter on American soil at Pearl Harbor, Hawaii.

Ironically, the imported cars of the Japanese invaders (despite all of the overinflated claims of their inherent superiority) are not selling now either.

Of course, buying a Japanese import under the current economic climate sends a profoundly insensitive, selfish and -- frankly -- anti-American statement to everyone who sees that new paper license plate flapping in the breeze. And an anti-Christian one, considering that the percentage of Japanese who claim to be Christians hovers in the low single digits.

Certainly, most car and light truck buyers don't think much about nationalism or religion when buying a motor vehicle. But the congregants at Greater Grace Temple and scores of other churches that will be hard-hit if one or more of the Detroit 3 fails certainly do.

Meanwhile, Mike Huckabee continues his not-so-subtle war against any assistance whatsoever for the Detroit 3. On Huckabee's Fox News program, he repeatedly pointed out that "Main Street" was not going to get the same kind of "help" as GM, Ford and Chrysler. Along with Alabama Senator Richard Shelby, Huckabee has become a leading mouthpiece for the "let'em fail" crowd.

Of course, Huckabee -- for all his virtues -- is merely pandering to the "Club For Growth" wing of the G.O.P. on this one. He fails to recognize that decades of Washington's policies "broke" the Detroit 3. He fails to notice that the Detroit 3 are abnormally vulnerable to this credit crisis because the playing field is tilted away from the Detroit 3 by government policy. He cannot see that the Detroit 3 have been intentionally bled to near-death from thousands of cuts produced by government hatchets. He apparently cannot see the impact that a failure of the Detroit 3 would have on the greater U.S. economy and American society as a whole.

Instead, he's as myopic as one of those broke seminary students that he used to be --one of the self-centered ones that will buy the cheapest available car from "godless Japan" instead of supporting the jobs of more of his fellow American brothers and sisters, many of which are tithe-paying, devout Christians.

Another irony is that Governor Huckabee -- unashamedly a praying Christian and former minister -- may be praying at cross purposes to those devote folks at the "Church of the SUV" in Detroit. Of course, such irony is virtually always present in contested political battles (and even shooting wars).

It would seem that the Greater Grace Temple "prayer force" has its work cut out for it. But then, according to the bible, "Nothing is impossible with God."

Just tell that to Rick Wagoner and thousands of other soon-to-be-pink-slipped auto workers.