Detroit, Debt, and Automotive History

An example of Detroit's plastic-wrapped automotive history that might be sold. (Photo by Stephen McGee for The New York Times.)

The Detroit Institute of Art's collection isn't the only asset in danger as the Motor City flirts with bankruptcy. A treasure trove of classic cars is also in peril. Jaclyn Trop and Bill Vlasic of The New York Times report:

But there is another Detroit family jewel in question that is largely unknown outside the automobile world and to some people even more treasured — a collection of 62 lovingly maintained classic cars donated to the city since the 1950s by civic-minded families seeking to preserve the Motor in Motor City.

Most of the cars are stored under protective plastic bubbles in a World War II-era riverfront warehouse on the grounds of Fort Wayne, while others are on display at the Detroit Historical Museum or on loan to exhibits around the country.

Trying to Buy G.M.'s Friendship

The New York Times has a story today illustrating one of life's lessons that Flint learned long ago...just because a city is nice to a corporation like G.M. doesn't mean G.M. is going to return the favor.

Louise Story reports:

In the end, the money that towns across America gave General Motors did not matter.

When the automaker released a list of factories it was closing during bankruptcy three years ago, communities that had considered themselves G.M.’s business partners were among the targets.

For years, mayors and governors anxious about local jobs had agreed to G.M.’s demands for cash rewards, free buildings, worker training and lucrative tax breaks. As late as 2007, the company was telling local officials that these sorts of incentives would “further G.M.’s strong relationship” with them and be a “win/win situation,” according to town council notes from one Michigan community.

Yet at least 50 properties on the 2009 liquidation list were in towns and states that had awarded incentives, adding up to billions in taxpayer dollars, according to data compiled by The New York Times.

Can an Entire State Declare Bankruptcy?

Is bankruptcy the answer to budget and public pension woes of Michigan and other troubled states? It might not be as far-fetched as it sounds. Policymakers are working behind the scenes to make it possible.

Mary Williams Walsh of The New York Times reports:

Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.

“All of a sudden, there’s a whole new risk factor,” said Paul S. Maco, a partner at the firm Vinson & Elkins who was head of the Securities and Exchange Commission’s Office of Municipal Securities during the Clinton administration.

For now, the fear of destabilizing the municipal bond market with the words “state bankruptcy” has proponents in Congress going about their work on tiptoe. No draft bill is in circulation yet, and no member of Congress has come forward as a sponsor, although Senator John Cornyn, a Texas Republican, asked the Federal Reserve chairman, Ben S. Bernanke, about the possibility in a hearing this month.

Happy Days for G.M.?

To commemorate General Motors emergence from bankruptcy, let's look back to before the beginning. These are shots of the the "ribbon wheel" that still resides in the Durant Dort Carriage Company Building, the birthplace of G.M. It's a unique, homemade keepsake that the carriage company created to honor its employees — many of whom have streets named after them in Flint.

Tell Fritz!

Reading The New York Times story on G.M.'s emergence from bankruptcy, two seemingly minor paragraphs jumped out at me:

1. "[CEO Fritz] Henderson announced several new ways that G.M. planned to reach out to customers through the Internet. A Web site called 'Tell Fritz' will let consumers offer suggestions directly to Mr. Henderson, and the company will experiment with selling vehicles through the online auction site, eBay."

Thanks for the empty P.R. gesture, G.M. Do you think potential customers really believe Fritz will take regular breaks from saving a corporation on the brink of extinction to peruse random email suggestions? This reveals a lot about how G.M. regards the public. At best, the company is out of touch with its customer base. At worse, the G.M. executives think we're all a bunch of idiots.

2. "Robert A. Lutz, a G.M. vice chairman who planned to retire at the end of the year, will stay to oversee marketing and communications. Mr. Lutz, 77, is responsible for the improvements that G.M. has made in vehicle design recently, with notable examples such as the Chevrolet Malibu and the newly revived Chevrolet Camaro."

Do you really want a 77-year old, regardless of his management skills, in charge of marketing a company that is notoriously alienated from the younger demographic?

UPDATE: Anyone remember Chrysler's ill-fated "Ask Dr. Z"?

G.M. Sells Saab

David Jolly of The New York Times reports:

"General Motors announced Tuesday that it had agreed to sell its Swedish unit, Saab Automobile, to a consortium led by the sports car maker, Koenigsegg Automotive.

"The companies said a deal was contingent on $600 million of financing from the European Investment Bank that is to be guaranteed by the Swedish government. They did not release further financial details of the deal, which is expected to close in the third quarter."

G.M. Announces Cuts and Closures

Here's a list of the plants and facilities affected by G.M.'s "accelerated manufacturing plan to improve capacity utilization and flexibility." (Perhaps they can find some PR flaks who write a bit better during the bankruptcy.)

June 1, 2009 U.S. GM Manufacturing Optimization Plan Actions

Plant	Status / Timing (date listed or sooner depending on market demand)
Assembly
Orion, Mich.	Standby Capacity - September 2009
Pontiac, Mich.	Close - October 2009
Spring Hill, Tenn.	Standby Capacity - November 2009
Wilmington, Del.	Close - July 2009
Stamping
Grand Rapids, Mich.	Close - June 2009 (previously announced)
Indianapol, Ind.	Close - December 2011
Mansfield, Ohio	Close - June 2010
Pontiac, Mich.	Standby Capacity - December 2010
Powertrain
Livonia Engine, Mich.	Close - June 2010
Flint North Components, Mich.	Close - December 2010
Willow Run Site, Mich.	Close - December 2010
Parma Components, Ohio	Close - December 2010
Fredericksburg Components, Virg.	Close - December 2010
Massena Castings, N.Y.	Closed - May 1, 2009 (previously announced)
Service & Parts Operations (SPO) Warehousing & Parts Distribution Centers
Boston, Mass.	Close – December 31, 2009
Jacksonville, Fla.	Close – December 31, 2009
Columbus, Ohio	Close – December 31, 2009

Bankruptcy Looms for G.M.

Bankruptcy could come as early as Monday for G.M. Michael J. de la Merced and Micheline Maynard of The New York Times report:

Early Thursday, G.M. proposed a deal in which bondholders would receive up to a 25 percent stake — a bigger share than G.M. offered the autoworkers union — if they do not oppose its bankruptcy reorganization, and then said that a group representing many of the largest bondholders had accepted the offer.

The proposal came as administration officials and G.M. began to discuss how the carmaker would look once it emerged from a court reorganization. The company is expected to seek bankruptcy protection by Monday, the deadline set by the Obama administration to restructure outside bankruptcy.

GM and UAW Reach Tentative Deal

The UAW and GM have reached a tentative agreement to cut costs and restructure payments to the healthcare fund, but a lot more needs to happen for the automaker to avoid bankruptcy.

Nick Bunkley of The New York Times reports:

The U.A.W. did not release details of the deal, which is subject to ratification by G.M. workers. The agreement is expected to be similar to one reached last month with Chrysler, which allowed that automaker to substitute equity for up to half of the $10 billion owed to its retiree health care fund. G.M. owes about twice that amount to the fund for its workers.

The deal is one of the government’s requirements for G.M. to win more loans but is not enough in itself to keep the carmaker from having to file for bankruptcy protection on June 1, the government’s deadline. More important, G.M. needs to persuade nearly all of the bondholders who hold more than $27 billion of its debt to swap their claims for stock in the restructured company. Most analysts expect the offer to fail.

Chrysler Declares Bankruptcy

It's bankruptcy for Chrysler.

"The bankruptcy filing could serve as a preview of what a filing by General Motors might look like. G.M., which like Chrysler received federal assistance last year, faces a June 1 deadline for its own restructuring," reports The New York Times. "Chrysler said that as part of the restructuring, it would idle most manufacturing operations beginning Monday, and resume production 'when the transaction is completed, which is anticipated within 30 to 60 days.'"

Auto Industry in Motion

GM is instituting mandatory summer "vacation" at 13 plants, and Chrysler seems destined for bankruptcy.

Saab Story

Saab, a subsidiary of G.M., declares bankruptcy. (Photo Courtesy of saabhistory.com)

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.

Bush Reverts to Form

Did anyone think President Bush would really help out an industry with a powerful labor union? After hinting that a bridge loan from the Wall Street bailout was in the works, then a little hemming and hawing and stalling, the White House is now floating the idea of an "orderly" bankruptcy for G.M. and Chrysler. Let's hope it's slightly more orderly than the way the president — who has a staggering 68 percent disapproval rating — handled Iraq, Afganistan, New Orleans, and the financial crisis.

Pelosi Calls for GM Bailout

Mike Ramsey of Bloomberg.com reports:

"General Motors Corp. fell for a fifth day in New York trading as House Speaker Nancy Pelosi urged Congress to pass an emergency rescue package for the ailing U.S. auto industry.

"Lawmakers should take 'immediate action' before their new session begins in January, Pelosi, a California Democrat, said today in a statement. Analysts said only federal aid can prevent a collapse for GM, and reorganizing in bankruptcy may not be possible because the credit crunch has dried up financing.

"'Strategic bankruptcy is not an option for GM,' said Mark Oline, a credit analyst with Fitch Inc. in Chicago. 'This is an issue of operating or not operating.'"