Citizens Bank Gets Another Bailout

Citizens Bank goes back for more bailout money.

For contrast, here's a story on community banks that did things a little differently. Jim Rendon of The New York Times reports:

"In the midst of the worst banking crisis since the Great Depression, community banks have generally fared well. That’s because they typically shunned the lending practices that led to high default rates. They rarely participated in the securitization of loans, credit-default swaps and other overvalued financial products that put the global financial system in crisis. Instead, they stuck to the fundamentals. They considered the character and history of their borrowers. They required collateral. Without community banks, the current financial crisis would be a lot worse. And even though they operate in a different sphere from global financial giants like Citigroup, some economists now say that they may have a lot to teach our largest institutions."

G.M. Bankruptcy More Likely Now?

The Chrysler bankruptcy may make it a more appealing option for President Obama as he attempts to reform G.M., according to The New York Times:

No one thinks Mr. Obama is going to allow G.M. to be broken up, its assets sold or abandoned.

But if the Chrysler legal process unfolds as the White House hopes it will in coming weeks, the bankruptcy option may look increasingly attractive for G.M. as well, officials on Mr. Obama’s automotive task force said. Bankruptcy may also be the only way to force the kind of paring down that Chrysler, with a third of G.M.’s workers and half the number of plants, did not have to endure.

“The threat of bankruptcy is very important in the negotiations with the bondholders and the dealers and others,” said David E. Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. “Without a clear and present danger to them, they won’t make a reasonable deal.”

G.M. Back for More?

According to The Wall Street Journal, G.M. will be asking for more money, even if they decide on bankruptcy as the automaker faces a Tuesday deadline for a restructuring plan.

John D. Stoll and Sharon Terlep report:

General Motors Corp., nearing a federally imposed deadline to present a restructuring plan, will offer the government two costly alternatives: commit billions more in bailout money to fund the company's operations, or provide financial backing as part of a bankruptcy filing, said people familiar with GM's thinking.

The competing choices, which highlight GM's rapidly deteriorating operations, present a dilemma for Congress and the Obama administration. If they refuse to provide additional aid to GM on top of the $13.4 billion already committed they risk seeing an industrial icon fall into bankruptcy.

Sammy Davis Says "Hello Detroit"

Detroit's been taking a lot of crap lately, but it's good to know Sammy will never abandon Motown. Thanks to Grumkin for reminding me of this gem.

Bailout for Rowe Building

Downtown Flint developers catch bailout fever to keep the Rowe Building project from stalling.

Bush Approves Loans to Automakers

David M. Herszenhorn and David E. Sanger of The New York Times report:

"President Bush on Friday announced $13.4 billion in emergency loans to prevent the collapse of General Motors and Chrysler, and another $4 billion available for the hobbled automakers in February with the entire bailout conditioned on the companies undertaking sweeping reorganization plans to show that they can return to profitability.

"Mr. Bush made his announcement a week after Senate Republicans blocked legislation to aid the automakers that had been negotiated by the White House and Congressional Democrats, and the loan package announced by the president includes roughly the identical requirements in that bill, which had been approved by the House."

Direct Democracy

What happens when the U.A.W. pays a visit to Sen. Richard Shelby? Go here to find out.

Rooting for the Competition

Not only does God favor a loan for the Big Three, but the Japanese automakers are praying that none of the American companies folds.

Yuri Kageyama of The Associated Press reports:

"But now as GM and the entire U.S. auto industry teeter on the brink of collapse, Toyota and other Japanese carmakers are hardly rejoicing. They say the bankruptcy of any of Detroit's Big Three would spell serious trouble for them as well.

"Should that happen, 'the damage to our business is certain to be tremendous,' Toyota Motor Corp. spokesman Hideaki Homma told The Associated Press on Monday. 'The conditions for the U.S. auto market are extremely tough right now, and any additional negative is sure to make things worse.'

"One major problem is that Japanese carmakers in the U.S. share many of the same parts suppliers. If a Detroit automaker were to collapse, suppliers would likely follow, setting off a chain reaction that could would wreak havoc for Japanese production in the U.S., a vital market."

Republican Senators from the South, are you listening? Probably not.

Thanks to Jim Holbel for finding this one.

Yankees Versus Rebels

Robert Reich describes the new war between the states over auto manufacturing:

"A new Civil War is breaking out when it comes to automaking in America, and it was evident in the lineup yesterday of senators for and against bailing out Detroit. Japanese, Korean, and German automakers are now building 18 auto assembly plants in the United States, none of which is unionized. Kentucky (home to Senate Republican Leader Mitch McConnell) already has Toyota's biggest auto assembly plant outside Japan. Tennessee (home to Senate Rep. Bob Corker, who came up with the "chapter 11" bailout amendment which was the basis for an attempted compromise yesterday) houses Nissan's North American headquarters. Alabama (Senate Rep. Richard Shelby) hosts a range of foreign automakers.

"There's no reason to suppose the good citizens of Kentucky, Tennessee, or Alabama are particularly excited at the prospect of handing over their taxpayer money to competing firms and their workforces, especially since almost every one of these states already gave foreign firms big tax-payer supported inducements to come and create jobs there."

Bush to the Rescue! Huh?

Either President Bush has suddenly discovered a new-found love of shoprats, or he doesn't want to be remembered as the next Herbert Hoover. After Republicans in the Senate filibustered to stop a vote on a government loan for the Big Three, the White House announced the Wall Street bailout funds could be used to help the auto industry.

Citizens Gets Its Share

Citizens Bank claims $300 million of Federal bailout money.

And the news prompted Rich Frost to slightly rewrite the Citizens Bank Weather Ball Song:

When the weather ball is blue...
Colder temperatures are due

When the weather ball is red...
Warmer temperatures are ahead

When the weather ball blinks in anticipation...
There's a chance of precipitation

When the weather ball turns green...
Citizens get bailout bucks to finance their corporate dreams

Spending Spree

At least the senators who don't think the auto industry deserves a loan are keeping a close eye on how Wall Street is spending their bailout money, right? Well, not exactly.

TPM Muckraker reports:

"Among the measures that Congressional Democrats successfully held out for -- against the wishes of the White House -- were meaningful oversight mechanisms that would allow Congress and others to track what the Treasury Department is doing with all that money.

"That seemed like a victory for taxpayers at the time. But now, over two months later, we've learned a bit about what those oversight mechanisms have been able to provide. And there's real reason to question whether in fact they were designed adequately for the task in the first place.

"'It's a mess,' Eric M. Thorson, the Treasury Department's inspector general, told the Washington Post last month. 'I don't think anyone understands right now how we're going to do proper oversight of this thing.'"

Bailout Bill Stalls in Senate

Many of the Republican senators who gave Wall Street a $700 billion handout with no strings attached are refusing to vote for a $14 billion bridge loan for the Big Three, despite almost total government oversight of the money. The so-called bailout bill appears to be dead in the water.

Is it time to mention the unmentionable? A gas tax!

There seems to be a slight problem with forcing the Big Three to produce more small cars and develop hybrid and electric vehicles — they won't be profitable in the short term, especially with gas prices suddenly plummeting. In fact, many auto analysts believe Toyota actually loses money on every single Prius it sells. So if the Japanese aren't turning a profit on a very popular car, how would the Americans pull it off?

This has led some to propose something that will probably never happen...a gas tax or broader-based carbon-emissions tax to give buyers a real incentive to give up their gas guzzlers.

Andrew Samwick is one of them:

"The reason the tax works is that it encourages us to conserve in every way we possibly can. Nobody likes to pay higher taxes, but if we are serious about reducing emissions, a carbon tax is the most fair and comprehensive way to get the job done."

Ad It Up

Click on image for expanded view.

Thanks to Max for sending this my way.

Write Off

Here's a letter on the bailout that's causing a stir:

Editor:

As I watch the coverage of the fate of the U.S. auto industry, one alarming and frustrating fact hits me right between the eyes. The fate of our nation's economic survival is in the hands of some congressmen who are completely out of touch and act without knowledge of an industry that affects almost every person in our nation. The same lack of knowledge is shared with many journalists whom are irresponsible when influencing the opinion of millions of viewers.

Sen. Richard Shelby of Alabama has doomed the industry, calling it a dinosaur. No Mr. Shelby, you are the dinosaur, with ideas stuck in the '70s, '80s and '90s. You and the uninformed journalist and senators that hold onto myths that are not relevant in today's world.

When you say that the Big Three build vehicles nobody wants to buy, you must have overlooked that GM outsold Toyota by about 1.2 million vehicles in the U.S. and Ford outsold Honda by 850,000 and Nissan by 1.2 million in the U.S. GM was the world's No. 1 automaker beating Toyota by 3,000 units.

When you claim inferior quality comes from the Big Three, did you realize that Chevy makes the Malibu and Ford makes the Fusion that were both rated over the Camry and Accord by J.D. Power independent survey on initial quality? Did you bother to read the Consumer Report that rated Ford on par with good Japanese automakers.

Did you realize Big Three's gas guzzlers include the 33 mpg Malibu that beats the Accord. And for '09 Ford introduces the Hybrid Fusion whose 39 mpg is the best midsize, beating the Camry Hybrid. Ford's Focus beats the Corolla and Chevy's Cobalt beats the Civic.

When you ask how many times are we going to bail them out you must be referring to 1980. The only Big Three bailout was Chrysler, who paid back $1 billion, plus interest. GM and Ford have never received government aid.

When you criticize the Big Three for building so many pickups, surely you've noticed the attempts Toyota and Nissan have made spending billions to try to get a piece of that pie. Perhaps it bothers you that for 31 straight years Ford's F-Series has been the best selling vehicle. Ford and GM have dominated this market and when you see the new '09 F-150 you'll agree this won't change soon.

Did you realize that both GM and Ford offer more hybrid models than Nissan or Honda. Between 2005 and 2007, Ford alone has invested more than $22 billion in research and development of technologies such as Eco Boost, flex fuel, clean diesel, hybrids, plug in hybrids and hydrogen cars.

It's 2008 and the quality of the vehicles coming out of Detroit are once again the best in the world.

Perhaps Sen. Shelby isn't really that blind. Maybe he realizes the quality shift to American. Maybe it's the fact that his state of Alabama has given so much to land factories from Honda, Hyundai and Mercedes Benz that he is more concerned about their continued growth than he is about the people of our country. Sen. Shelby's disdain for "government subsidies" is very hypocritical. In the early '90s he was the driving force behind a $253 million incentive package to Mercedes. Plus, Alabama agreed to purchase 2,500 vehicles from Mercedes. While the bridge loan the Big Three is requesting will be paid back, Alabama's $180,000-plus per job was pure incentive. Sen. Shelby, not only are you out of touch, you are a self-serving hypocrite, who is prepared to ruin our nation because of lack of knowledge and lack of due diligence in making your opinions and decisions.

After 9/11, the Detroit Three and Harley Davidson gave $40 million-plus emergency vehicles to the recovery efforts. What was given to the 9/11 relief effort by the Asian and European Auto Manufactures? $0 Nada. Zip!

We live in a world of free trade, world economy and we have not been able to produce products as cost efficiently. While the governments of other auto producing nations subsidize their automakers, our government may be ready to force its demise. While our automakers have paid union wages, benefits and legacy debt, our Asian competitors employ cheap labor. We are at an extreme disadvantage in production cost. Although many UAW concessions begin in 2010, many lawmakers think it's not enough.

Some point the blame to corporate management. I would like to speak of Ford Motor Co. The company has streamlined by reducing our workforce by 51,000 since 2005, closing 17 plants and cutting expenses. Product and future product is excellent and the company is focused on one Ford. This is a company poised for success. Ford product quality and corporate management have improved light years since the nightmare of Jacques Nasser. Thank you Alan Mulally and the best auto company management team in the business.

The financial collapse caused by the secondary mortgage fiasco and the greed of Wall Street has led to a $700 billion bailout of the industry that created the problem. AIG spent nearly $1 million on three company excursions to lavish resorts and hunting destinations. Paulson is saying no to $250 billion foreclosure relief and the whole thing is a mess. So when the Big Three ask for 4 percent of that of the $700 billion, $25 billion to save the country's largest industry, there is obviously oppositions. But does it make sense to reward the culprits of the problem with $700 billion unconditionally, and ignore the victims?

As a Ford dealer, I feel our portion of the $25 billion will never be touched and is not necessary. Ford currently has $29 billion of liquidity. However, the effect of a bankruptcy by GM will hurt the suppliers we all do business with. A Chapter 11 bankruptcy by any manufacture would cost retirees their health care and retirements. Chances are GM would recover from Chapter 11 with a better business plan with much less expense. So who foots the bill if GM or all three go Chapter 11? All that extra health care, unemployment, loss of tax base and some forgiven debt goes back to the taxpayer, us. With no chance of repayment, this would be much worse than a loan with the intent of repayment.

So while it is debatable whether a loan or Chapter 11 is better for the Big Three, a $25 billion loan is definitely better for the taxpayers and the economy of our country.

So I'll end where I began on the quality of the products of Detroit. Before you, Mr. or Ms. Journalist continue to misinform the American public and turn them against one of the great industries that helped build this nation, I must ask you one question. Before you, Mr. or Madam Congressman vote to end health care and retirement benefits for 1 million retirees, eliminate 2.5 million of our nation's jobs, lose the technology that will lead us in the future and create an economic disaster including hundreds of billions of tax dollars lost, I ask this question not in the rhetorical sense. I ask it in the sincere, literal way. Can you tell me, have you driven a Ford lately?

Jim Jackson
Elkins

A Divine Bridge Loan

In Detroit, it appears that God favors a bailout for the Big Three.

As American as Baseball, Apple Pie and Chevrolet

Is the United States about to nationalize the auto industry?

Wagoner might need to get out for G.M. to get bailout

G.M.'s gain may be Chief Executive Rick Wagoner's loss.

The Wall Street Journal reports: "On Sunday, Sen. Christopher Dodd (D., Conn.), a supporter of emergency loans for Detroit, suggested Mr. Wagoner should go if the government follows through and provides billions of dollars to help the auto giant restructure and return to profitability."

Domestic Disturbance

The blog Katy Bar the Door examines the conflicting feelings many Americans have about the Big Three bailout. It's especially tough when you have a family connection with Flint and the auto industry:

"If GM were a horse I would call the vet and have it put out of its misery. I realize how a failed GM will devastate my family as well as this entire country. I get it probably more than most people because I grew up in Flint. But there has to be a better way then giving them our hard earned tax money."