Detroit gets it's Christmas present - US $25 Billion repayable loan (Ho.Ho.Ho.) to get them through till about Superbowl time.
Today's New York Times reports that , frightened shitless by the November unemployment figures, Senate majority leader, Harry Reid, House Speaker Nancy Pelosi have , with the Chairman of the Senate banking committee, Democrat Christopher J. Dodd, colluded with Joshua B. Bolten, President Bush’s chief of staff, after helpful chats with the unbiquitous Rahm Emanuel, Mr. Obama’s chief of staff and even President-elect Barack Obama to cobble together a last minute , last ditch give away and Christmas present to Detroit.
With typical political financial legerdemain they have transformed an already but delayed pot of $25 billion in federally subsidized loans intended for developing fuel-efficient cars into ..er ... a "short term rescue plan"...which will eventually seee US$100 Bn + shovelled their way.
This unblocks the legislative Congressional log jam allowing Treasury secretary, Henry M. Paulson Jr., to request the remaining $350 billion of the financial industry bailout fund to squander as he chooses.
It seeems a good time to review Section 8 of the 3 Page bill Hank the Bank sent to Congress initially on September 20th 2008.
Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
It also seems a good time to re-publish this :
18/3/05 GM makes you sick - published 18th March 2005
“Detroit catches a cold the US gets pneumonia”. GM common stock today trades at 35% of its Jan 1 2000 value, over at Dearborn, Ford suffer even more, their stock has sunk to 25% of it’s millenial value.
The Asian cuckoos in the nest have prospered. Honda? Up 155% in the same period. Nissan? 190% and Toyota, GM’s major rival in the US home market 97%.
Wall Street scribes sneer that GM, Ford are welfare / pension businesses with a car plant attached – the lap dog media have an unholy alliance with the Detroit car makers that stifles criticism, shared by the Unions – It takes a lot of outside agitation before safety, legislative or environmental stories see the light of day.
Faced with slumping sales and market share, CEO of GM, Rick Wagoner reporting disastrous Q1 2005 figures this week said: “We have had an incentive-driven strategy that has been quite effective. That effectiveness has eased off. [Now] there will be more focus on value.” This is Detroit easyspeak for, “Well we’ve tried giving away the product, now we are going to spend more money on advertising”. A sure sign that if management ever understood the problems they long ago ran out of solutions.
GM’s flagship Chevrolet Silverado pick-up slipped by 1.4 per cent in the first two months of this year. By contrast, sales of Nissan’s new Titan made in Canton, Mississippi, soared by 55 per cent and Toyota’s Tundra made in Princeton, Indiana, rose by almost a third. Honda made their first motorbike in the US in Ohio 25 years ago and now have 12 North American plants. This year they launch the brand new Ridgeline truck made in Alliston, Ontario .
So if you have some money to invest, do you stick it in GM whose shares dropped 14% yesterday to $29 Mkt Cap $16.4 Bn or boost Milwaukee economy and stick it in Harley Davidson stock with Mkt Cap $17.7 BN – or go buy an Electraglide in Blue – priceless ?
The results for 1st Qtr of 2005 announced this week don’t encourage anyone to advise the widows and orphans to invest in GM. Warren Buffet certainly won’t be – at any price. They will lose $1.50 a share in 05 Q1 and “maybe” earn $1 a share this fiscal year 2005 against a recent January forecast of $ 4/5 a share.
GM’s sales are off 6.3%, profits 37% and market share below 25% for the first time since the 1930’s. Sports Utility Vehicles ( SUV ) sales dropped 37% in Q4 2004. Meanwhile Toyota’s US market share remorselessly rose from 12.1 to 13.1 % in 1st 2
Moody’s Credit rating of Baa2, puts GM just two notches above junk status.
Standard & Poor’s Rating Services “negative” from “stable.” GM’s BBB rating, one step above junk status.
Rumour says GM may get help from Washington to reduce health-care costs, which are expected to top $5.6 billion this year, up from $5.2 billion last – adding $1,500 to the ticket price of every vehicle they sell. GM has 430,000 North American retirees, 2 1/2 times its active workforce,
Demand is dead. GM’s North American production is down in Q1 2005 to 1.18 million vehicles, down 12% year on year.
GM, has $116 Bn of Bonds, the extra yield investors demand to hold GM’s 6.875 recent note maturing in 2011 over U.S. Treasuries has widened this week about 60 basis points to 3.85 percentage points.
U.S. crude oil futures ended at a new record price after the government reported a larger-than-expected drop in gasoline supplies last week. West Texas light for April delivery settled at $56.46, gaining $1.41, after soaring to an intraday peak of $56.50.
So what have GM been doing to increase fuel efficiency? Well fleet performance of GM cars has gone from 27.8 miles per US gallon to 28.8 mpg in the last 5 years and for light trucks 20.7 mpg to 21.2 (which includes a notional “E35 credit” for ethanol) says the Company 2004 Corporate Responsibility report. It explains “since 1990, new vehicle fuel economy has been relatively constant as consumers, reflecting increased disposable income and relatively low fuel prices, have not emphasized vehicles with high fuel economy”.
That’s it folks, it’s down to the consumers, faced with refinery shutdowns, declining oil resource, increasing oil imports from less stable political zones we did nothing. The dollar dives, the imports soar – and do you know, it’s the consumers fault – those wacky guys over at Toyota with their hybrids (sales over 500,000 worldwide as they lead the technology) and customer queues sneaking round the block, well, maybe they just got lucky.
GM has too many mouths to feed, too many brands / divisions and no vision. No hybrid vehicles just more gas guzzlers – the world has changed and they didn’t see it, not only high and rising gas prices but steel and oil based plastics etc., – so says Rick we’ll spend more on advertsing.
If you think GM is sick, if you think Ford is sick, look at Boeing, their stock dropped 3% when Continental (with unions rejecting a pay cut deal) threatened dropping orders for the Dreamliner 787, their trump card in the sales battle with Airbus. The composite construction Dreamliner with a rudder made in China, fuselage and wing bases in Japan, nose cone in Everett California, de-icing kit made in the UK is a throw in, the last chance saloon for a company who chucked out their CEO last week for romancing in the office.
US manufacturing industry has failed to understand and react to a rapidly changing world. Emboldened by the strident, pre-emptive, transformational world of the Bush imperialist gang, exporting by force of arms and bribery their distorted vision of democracy, their own has been disembowelled.
Black Monday II coming soon at a Stock Market near you.