March 30, 2009

Prospects Brighten For Buggy Whip Industry

He liked engineering Detroit so much he bought the industry.

What does it mean if a President can force the resignation of a CEO that still answers to shareholders?

Or force a merger?

The rationale was drawn from the infinite corporate experience that President Obama brings to the table ...

[Wagoner] is considered responsible for increasing GM's focus on trucks and SUVs—at the expense of the hybrids and fuel efficient cars that have become more popular in the last couple of years.

In other auto news: American hybrid sales fall off a cliff

Posted by Kate at March 30, 2009 12:23 AM

Only hope for change is the Mid-Terms. 18 months to go. Be strong.

Posted by: ron in kelowna at March 30, 2009 12:40 AM

This will be the new official powers of the Systemic Risk Regulator, they are just trying it out via the "Auto Task Force" using the bailout cash first.

Kinda a trial run on how much they can get away with as an "Investor", that is the procedure they are test driving now, but they know that they cannot "bailout" everyone. The citizens are at the end with tolerance for this.

So without some body designed to identify "Too Big to Fail" systemic corporations ( which is the job for the New Systemic Risk Regulator ) they cannot use bailouts in the future. The new procedure will be much less covert.

Oh it will be all innocent like and called "Investments in America's Manufacturing Future" or some such nonsense.

The end result will be creeping socialism, because if you think for one minute that the US financial system is not nationalized you have not been paying attention, each Treasury action places more and more of the banks under the control via the "Investment" made to date.

Barney Frank Said it all... regarding AIG ... "we own it and we should exert our control as the owners" note that the US Taxpayers do not own it, but the Congress and Administration own it.

They also effectively own CitiGroup, so far the rest are protected. Yet with Chrysler they will prove that even Private Corporations can be "Too Big" so being non-public will not be a shield from regulation.

All this pales against the EPA and Energy Department Plans.

Posted by: Illiquid Assets at March 30, 2009 12:54 AM

In 1900 the Carriage industry was the largest mass production industry the world had ever seen. It is estimated that there were 30,000 carriage manufacturers both big and small in North America.

Companies like Studebaker, Durant Dort and Sears Robuck produced in excess of 100,000 carriages each a year. Studebaker was so advanced that when the US government wanted 300 heavy army wagons for the spanish American war, Studebaker completed it in 24 hours!

By 1910 the Carriage industry faced serious competition from the automobile industry. By 1920 the carriage industry had collapsed. Hundreds of thousands of jobs were lost. Not just in manufacturing, but in harness making, livery stable workers, manure cleaners, horse handlers.

Where did all the jobs go? Didn't the government care about its citizens? Where were the subsidies? Where was the stimulus? Where were the trade barriors to protect domestic jobs?

The carriage industry wanted protection. They did not get it. Can you imagin what our history would have been if North America was forced to use carriages in order to protect jobs?

The free market system isn't kind or gentle but it is good. It has created all the progress we enjoy today and I hope it is given a chance to guide our future. If it is not, our generation will be looked down on as the greatest fools in history, driving our Congress / Parliament approved Chevy Lada's while the rest of the world drives us into the ground.

Posted by: Rob at March 30, 2009 12:55 AM

Rob: unlike carriages there is no alternative to cars in the offing.

The domestic makers are being killed off by intransigent unions that over the past fifty years emasculated the mangement ranks. Wagoner is the perfect example of such emasculation. Right up to the end he was trying to defend the status quo and get along.

It is the union movement not the auto sector that needs to - and is going to - go the way of the buggywhip.

Posted by: Gord Tulk at March 30, 2009 1:19 AM

Nonetheless, Gord - the replacement of a CEO by a sitting President should be a development that prompts every American to throw up a little in their mouth.

Posted by: Kate at March 30, 2009 1:25 AM

I watched Ed Liddy from AIG in the House "hearing". He took so much crap from odious people like Barney Frank and Maxine Waters (who automatically lowers the average IQ in any room just be entering it), it's a wonder he didn't walk out. I don't blame Wagoner for bailing; for the $1 a year he gets paid, it's not worth the aggravation. He'll make more money wherever he winds up (and he'll find a job - you don't rise to the top of GM without having some skills), and he'll be out of the public eye.

Frank is the worst of the bunch, though. When Liddy read the letter detailing death threats to the bonus babies, and their wives and kids, and said he didn't want to make that list public, Frank just pooh-poohed him. "Oh, we get those all the time" the corpulent queen lisped. Yeah, and I bet the FBI investigates threats against Congress members; bankers, not so much.

Posted by: KevinB at March 30, 2009 1:27 AM

Amen, Kevin. A part of me hoped to learn that every employee at AIG had tendered their resignation the morning after.

Posted by: Kate at March 30, 2009 1:35 AM

“The task force.., said Chrysler's best hope for revival lies in a proposed partnership with Italy's Fiat SpA.”

I see Fiat is already in partnership some of the world’s other automotive powerhouses: Serbia, Russia, Bulgaria, Turkey, South Africa, Ethiopia, Egypt, India and Sri Lanka.

This merger with the Italians should have happened sooner. All that unpleasantness with Mrs. Robison could have been avoided if Ben drove a Hemi Road Runner.

Posted by: Cal at March 30, 2009 1:48 AM

The firing (asking) for Wagoners resignation is unconstitutional. WTF does a Bond Holder (lender) have to do with ownership, they may call in the loan and force liquidation, but seizing control of a publicly traded company is not going to resonate in the economy. Who is stupid enough to risk thier Money when the US Government is behaving like a satellite of the Former USSR?

The hot issue:
The Shareholders of GM must have the right to petition the Courts for damages. That is suing the EPA & the State of California for co2 regulations. This action by Obama is an act of intimidation, in making GM agree not to sue as a condition of funding. So said Barbara Boxer.

Posted by: Phillip G. Shaw at March 30, 2009 3:00 AM

I hear what you're saying, Kate, but my own views still lean closer to Gord's. It seems clear that Rick Wagoner was an absolute disaster as CEO of GM. The correct course of action at the start of his tenure would have been to take a firm stance and say to all, "We have become a massive old age health care rest home provider with a small loss-making automobile manufacturing division" (to borrow a line from Mark Steyn).

But instead, he went on & on & on with the status quo. Some have suggested that he, the head of the UAW, and several Michigan and federal politicians have all been in cahoots for some time.

I wish he had resigned on his own a long time ago. He has not. I desperately fear that Obama will now engineer a Democrat lackey to take over but who knows.

So I agree with you about the severe oddness of an American president interfering with a private enterprise CEO but then we'd probably both agree that no bailout with public funds should have occurred in the first place!

Posted by: Robert W. at March 30, 2009 3:40 AM

I did my two cents' worth on Barack Hugo Chavez Obama's latest draconian move to dictate to the private sector, control business leaders' lives and impose state control of the means of production...

National Socialism's a [censored by liberal fascists, HRC agents wearing brown shirts & jackboots sent to CS's door to deliver stern "lecture" (warning)]...

Posted by: The Canadian Sentinel at March 30, 2009 3:50 AM

Obama just blew it. The facade is OVER. He actually believes that he is the ONE. Heh you, GM guy, on your KNEES. This is insane......... I'm digging in, the TOTUS is drunk on power, and oh, Acorn wants your car and your kids. Lunacy...... barry could not cut this man's toenails in a den for men, I don't know what I am saying, because nothing makes sense anymore. Hell with it, I gonna learn how to say, brother can you spare a dime in Mandarin and go from there. I just can't get the sound of his voice out of my head. Can't anybody stop this..........Nightmare.

Posted by: bruce wayne riley at March 30, 2009 4:03 AM

I have mixed feelings about this.

The auto industry leaders have failed on so many levels, so profoundly, and for so long, that it's hard to find the slightest ounce of sympathy for them. At the end of the day they will all end up extremely rich and with new jobs. How many millions who have lost their jobs and homes can you say the same for.

Obama won't be around forever. America won't turn communist that easily. But, maybe he can serve the purpose of cracking a few hard nuts.

Right now, so called "conservatives" in the US are too involved in social politics and laying blame for their failure to do anything to help the us. Witness the pathetic "budget" they presented a couple of days ago.

So, in the absence of any coherent opposition, Obama will get his way. For now.

But as discussed previously here, and in many other places, maybe it's really time for a new version of Conservatism in the US, with a different brand name.

Posted by: Lori at March 30, 2009 4:13 AM

I don't care if this CEO:
1) invested in cars for monkeys,
2) let homer simpson design the next family car,
3) paid himself a bonus of a billions of dollars,
4) hired interns on their ability to ......
5) watched CBC

I don't care if the company accepted bailout money!

It is absolutely NOT the duty of any politician to dictate who is charge of private companies.

It is absolutely NOT the duty of any politican to determine what individual private companies should produce or how.

This isn't the road to fascism, this IS fascism (i.e. national corporate systems).

So, for all the lefties out there, are you surprised yet that this has come from your side of the fence yet?? Or is the Bush Bunch still manipulating this (ahhh Karl Rove, you magnificent bastard)

Posted by: Frenchie77 at March 30, 2009 6:18 AM

Next thing you know, Obama is going to order Detroit to design a car for the "Volk".

Posted by: tim in vermont at March 30, 2009 7:23 AM

I don't understand the real circumstances or the real story yet but I do know that everyone (investers, engineers, etc. - the only guys that like him are probably the unions) has been trying to get rid of Wagoner for a long time - he's a politician not a leader and so he has been able to make deals to stay on - he's also made a fortune. He is considered responsible for destroying GM. He has crashed the stock over the last 10 years to being basically a couple of bucks from something near 100 bucks.

No one is going to lend money to GM with that guy in charge - their bonds are junk. The US government has to look at it the same way - if GM wants money then ditch the clown and bring in someone with a proven track record.

Concerning some comments on the carriage industry: The biggest carriage maker in the commonwealth and world (outside of the US) was McLaughlin based out of Oshawa (initially from Enniskillen which is a couple of miles north of Oshawa). McLaughlin decided that he needed to move into the motor car industry and started designing a car. His engine designer got sick and couldn't get the engine completed. McLaughlin had met Durant from Buick (who took over from David Buick) earlier and struck up a deal for Buick to supply engines for McLaughlin cars (now know as McLaughlin-Buick cars). McLaughlin built most of the car except for the engine and engine support which was imported from Detroit. In 1918 McLaughlin decided to merge with the new GM - and voila - GM Canada was born. That's why everything - the McLaughlin mansion - the McLaughlin musem - the McLauglin art gallery - every second street in Oshawa - and even things in Toronto like the McLaughlin Planetarium - are named McLaughlin.

Posted by: cconn at March 30, 2009 7:51 AM

even in here profit is a dirty word. - the high margin vehicles are panned. unions are only mentioned in passing.

Posted by: cal2 at March 30, 2009 7:51 AM

check out the full length feature here.

tipping over and not in slowmo.

Posted by: cal2 at March 30, 2009 8:00 AM

Obama and company just sent a message to the rest of private industry in the US. Today a large number of company CEOs will be discussing their options with their Board of Directors regarding future survival.

Considerations may include moving their operations out of the US. That will certainly help the unemployment numbers down the road.

They must do what they can to protect the shareholders investment before Obama "makes them an offer they can't refuse".

Is it any wonder that, when one puts the word "Obama" into an anagram software, the following is immediately evident:


Posted by: Yoop at March 30, 2009 8:01 AM

Waggoner may have been a schmuck but that's not the point. His successor will be a political appointment, and will do what obozo wants. With each subsequent action like this - there will be more - the appointee will be more connected and democrat compliant.
Nobody with any conservative ideals should be happy about this.

Posted by: hudson duster at March 30, 2009 8:03 AM

Watch out for this to trigger derivative swaps on the GM bonds...

GM has $1T out in bonds. Ouch.

Posted by: shaken at March 30, 2009 8:09 AM

Re: Next thing you know, Obama is going to order Detroit to design a car for the "Volk".
Posted by: tim in vermont at March 30, 2009 7:23 AM

Maybe he's trying to prove he can do a better job than the originator of the "Volkswagen". He's already got the design for the hoodornament.

1938 "Strength through Joy" = Volkswagen
2009 "Hope and Change" = GM Folkswagon .

Think about it!!

Posted by: John the Skeptic at March 30, 2009 8:21 AM

Ooh, can't wait for the markets to open today - another bloodbath?

Posted by: Boudicae at March 30, 2009 8:26 AM

"What does it mean if a President can force the resignation of a CEO that still answers to shareholders?"

Fascism. That's what.

How d'ya like that, Lefties? Bary's the friggin' picture next to the word "fascist" in the dictionary. Awesome!

Posted by: The Phantom at March 30, 2009 8:32 AM

It was within GM and Wagoner's power to avoid Owe's dictates. Don't take taxpayer's money and Owe can't touch you. It is within the power of every other CEO in the States to avoid Wagoner's fate. Don't accept taxpayers money. Had this been Bush disposing of the incompetent Wagoner we would all be cheering him but because it is Owe doing the dirty work we are pillorying him.

Posted by: Joe at March 30, 2009 8:43 AM

Why should it force nausea? That should have happened with the bailout.

If the government is going to do this then this is not a surprising move.

If this scares businesses into managing themselves so they don't come to the trough then I think that is a good thing. The least desirabe result would be failing businesses able to pull on political connections to get tax money so that management can stay in place.

Next issue, bondholders take a haircut, wages adjusted (done but not enough) and the real hairy one, pensioners benefits are cut to 85% of original value. This would have been done by a bankruptcy court, but the credit markets made that impossible.

Don't defend management, decry the fact that management let government into the woodshed in the first place, the rest are foreseeable consequences of the first decision.

Posted by: Stephen at March 30, 2009 9:00 AM

Joe at 8:43 AM. Agree fully.

Some will want to spin this as "Obama chasing future free enterprise success stories out of the US.".

I'd spin it as "perhaps the fear of being Obamacized will put a cap on the corruption inherent to our big business elite'.


One thing I am sure of. Politically this will work well for Obama initially.

Posted by: Lori at March 30, 2009 9:06 AM

I remember reading about a year ago that Ford would be the survivor because of the stabilizing influence of the Ford family. It seemed lame at the time but looks true now.

Posted by: cal2 at March 30, 2009 9:09 AM

Lori, you are correct. But now the problem is completely his. O has provided the money and now will hand pick a CEO. The problems they face arent new and arent unknown.

Just like Geithner's pan is really Paulson's plan, the new GM CEO will implement Wagoners plan, maybe a little faster who knows. GM's issues are structural (pension costs, wage costs, debt servicing costs) and these issues prevent or hamper the real business, designing and building great vehicles.

My concern was and is, so if GM and Chrysler get help and Ford goes without assistance, what prce do the suppliers (capital and labour) and management face. Without consequence why shouldnt Ford have accepted money as well.

During the depression FDR ensured that government workers hired in the workfare projects were paid LESS than private sector workers so that they would move back to the private sector as demand picked up.

Wagoner was a decent man, and was moving GM in the right direction.....just too slow. GM culture needs to change, but the long run choice for that wont be the government it will need to come from the private shareholders and bondholders.

But this is Obama's problem now...absolute and complete, he will wear its success or failure.

Posted by: Stephen at March 30, 2009 9:17 AM

Sorry I went to bed after my last post.

Wagoner is a symptom not the cause of GM's demise. (a demise that will happen sooner or later just like all of the companies that made up British leyland).

I a not sure whether this is the first time a POTUS has ever demanded a CEO resign publically. I am sure it has happened privately. As for whether a supposedly passive investor like a bondholder can exert power of a companies leadership, the answer is of course - the bond market told Jean Chretien and Paul Martin to clean up their spending or they wouldn't buy their bonds. In this case the bond holder representative is the TOTUS.

It will be interesting to see how the next CEO is chosen. If the dems meddle or it is someone cut from the same soiled cloth as wagoner, then GM may well become an organ of the Democratic party(perhaps it already is as someone above has mused - it would not surprise me that that is the case) and see it used as a milk cow for the UAW woth kickbacks the Dem party.

Posted by: Gord Tulk at March 30, 2009 9:30 AM

"Ooh, can't wait for the markets to open today - another bloodbath?"

DJIA down 202.63 @ 7:39 MDT

Posted by: Kathryn at March 30, 2009 9:40 AM

"Fascism should more properly be called corporatism because it is the merger of state and corporate power." -- Benito Mussolini"

O = Il Duce.
Berlusconi = Il Duce, cosi fan tutti.

"Mussolini's heirs merge with Silvio Berlusconi's Forza Italia party -"

Posted by: maz2 at March 30, 2009 9:53 AM

somewhat alarming...

It appears that "zero" has gotten his way (or the highway) with the GM executives. how does it play out for the next group of bailouts? everyone asking for a bailout, must cave in to "zero's" demands for a fresh face of his choosing at the top?

what does it take for the media to call this for what it is? oh yeah, they're next for bailouts... expect, "crickets".

assholes. all.

Posted by: marc in calgary at March 30, 2009 9:55 AM

This is right out of the NDP playbook. For those of us from BC and Ontario, we've seen this before.

Never thought I would see it out of a US president though.

The US is in deep deep do-do.

Posted by: DanBC at March 30, 2009 10:02 AM

Notwithstanding the fascist activity of the federal DemocRat party, I firmly believe it is all moot anyway. The Big Three are f-ed and have been for some time now, maybe as much as 15 years.

But even the non-bailout Japanese companies are going to be up against it quite soon. The current just-in-time manufacturing model is bumping up against the Next Big Thing in making stuff, the cloud.

Enter Tata Motors. Mr. Tata is making cars for $2500 bucks in India.

If there was ever a place that's a nightmare for making stuff, India is it. "Close Is Good Enough" should be the motto on their flag, and I have that from an Indian guy who made a buttload of rupees in manufacturing in India. Steam engines. They still use them. Socialism in action.

In this insalubrious manufacturing environment, Mr. Tata can punch out cars for twenty five hundred bucks. I can't even buy a turn-key crate engine for that here in super-duper precision manufacturing land, he's doing the whole car.

How? Cheap labor isn't it, because even the Chicoms can't match his price. Its the way he's got the business set up. Its a cloud. Or maybe an ant hill.

There's no inventory, each unit is custom, all the parts are ordered from whoever can drop it on his doorstep the cheapest this week, there's no dealerships, there's no shipping because of local assembly, all driven from the internet. Fascinating stuff.


Another example of this ant-hill kind of thing is the sand rail industry in California, or the custom chopper business. These are the same idea as Tata, just with American level regulations and wages, making very high performance vehicles. Still, if you don't order all the super-duper killer stuff, you can get a custom four seater sand rail cheaper than a Honda. Watch the prices plummet in our new capitalism-unfriendly environment too.

Detroit is doomed, Tokyo won't be far behind, and the current government methods for regulating and taxing will come apart in the next twenty years. Bary can nationalize to his heart's content, those wheels are coming off and staying off. Even an ant eater can't get -all- the ants.

I prophesy it. I also prophesy a return to manufacturing in Ontario. By about a million guys churning stuff out in their garage, no more big smokestacks. That's the real power-to-the-people.

Posted by: The Phantom at March 30, 2009 10:04 AM

I don't think you can blame the Big 3 for what they built. The public wanted SUV's and trucks and that is what they built. They made more money on trucks than small cars. All companies build these vehicles now but the truck is working America. We do not drive around with a cow in the trunk and a goat in the back seat. Last I heard Prius sales were down 30% and I ainta buyin' one. We won't run out of used cars in my lifetime so BAMBAM ain't selling me crap all.
Ford doesn't need bailout because they have a plant in South America that is the future and the USA is pretty much dead for competition. Would you buy a used car from Obama? At this point it would not surprise me if this were a shakedown Wagoner wouldn't play in.

Posted by: Speedy at March 30, 2009 10:06 AM

"What does it mean if a President can force the resignation of a CEO that still answers to shareholders?"

It means the nation operates under the economic model of fascism.

Posted by: WL Mackenzie Redux at March 30, 2009 10:58 AM

This is an interesting confluence. It is also very dangerous. Generally, people being preoccupied, as they should be, with everyday living, don’t give it much thought.
The thing is that the management has driven the companies to the ground. That being said, it is difficult to know all about the problems due to the press that omits key events in any story.
One problem is clear even to the SFC*, though they don’t mind, it is the mismanagement of unions by the management of the corporations. If you give all you are asked for and have nothing left, what do you do, go to the gobmint for money?
As Kate pointed out, it is not business of the president of US to run management of companies, unless of course he is following SFC ideology that tells him, that he can do anything he wants, never mind the constitution, never mind the law.
Current president seems to think that the constitution is what he sez it is and the same with law. Though so far very few in the corridors of power had the courage to tell the president, it ain’t so.

*Socialist, Fascist, Communist

Posted by: Lev at March 30, 2009 11:02 AM

Obama knows that he is going to double the price of gas, so those big vehicles will be losers. GM didn't factor the fact that Obama was going to be president into their vehicle plans. For that reason, Wagoner had to go.

Posted by: tim in vermont at March 30, 2009 11:31 AM

Kate is providing a very valuable service here. A sort of 'clearing house' of ideas and thought and rational. (This thread has certainly orientated my thoughts on the issue - any one person will NEVER know everything. The right answers are obtained by asking the pertinent questions) Too bad the rest of the world didn't operate like sda.

Yes, let this be a lesson for others thinking of accepting "bailout" money from Politicians.

Yes, GM is probably a special case basket case but where will the Obama 'directives' strike next ?! Your work place ? Your lifestyle ? Your morality ?

The "Big" Three have been behind the curve for decades - only inertia, buying habits kept the music going for as long as it did.

Mark Steyn summed it up perfectly; "a massive old age health care rest home provider with a small loss-making automobile manufacturing division."

Posted by: ron in kelowna at March 30, 2009 11:33 AM

Gord Tulk,

I think you miss my point about the carriage industry. The point is that commercial progress does not come from government, it comes from private industry making good decisions and prosering or dying if they make bad decisions as they navigate the market.

When governments intervene we get overly powerful unions, over-reaching regulations, and political policy decisions that trump market decisions.

If we had government like we do now a hundred years ago we would have no domestic carriage industry and no auto industry. It would have been the worst of both worlds.

Posted by: Rob at March 30, 2009 11:40 AM

Fascism indeed. My industry, extremely capital intense and critical to North Amerian commerce, refuses to accept government money every and only reluctantly enters into public/private partnerships because of past experience with government oversight and strings.

Think positive thoughts in the general direction of Detroit. Help they needed, not this.

Posted by: Anna Mac at March 30, 2009 12:05 PM

Two important trends have caused the problems for the American auto industry. I've noted previously that one problem is that people are hanging on to their cars longer, which depresses new car sales, thanks to improvement in quality.

But the other thing is the pension benefits. In 1960, average life expectancy for a man in the US was 69 years; he'd retire at 65 and draw a pension for four years. Now the average lifespan for a man is 75 years, and with the "30 and out" policy adopted in 1970, a person can retire at 55 and draw benefits for 20 years. And with health care costs outpacing the rate of inflation every year, the cost of insuring their retirees goes up every year. 30 and out, and increased health care benefits were part of the settlement after the nearly 3-month strike in 1970, a time when GM held 50% market share in the US, and executives feared an anti-trust suit. So they caved into the UAW, and Wagoner inherited their mess.

The oil spike last year didn't help, with Detroit's SUV/truck heavy product mix, but as Kate notes, no one is buying hybrids now. And, according to JD Power, the Malibu, Grand Prix, and Silverado all led their class in initial quality. For those who think "Japanese" is always better, it's interesting that Buick outpaces Acura - supposedly Honda's high end line - in initial quality. So I don't think the argument that GM builds shoddy cars holds water anymore.

Posted by: KevinB at March 30, 2009 12:08 PM

Anyone for a Politically directed and manufactured Lada ? Or Trabant ?

Posted by: ron in kelowna at March 30, 2009 12:09 PM

ron in kelowna asks: "where will the Obama 'directives' strike next ?! Your work place ? Your lifestyle ? Your morality ?"

The end result: RuhOllah O.

The Way? The shaming/coercion by using/deploying the State's weapons, e.g., the Green Ramadan of Earth Hour.

"Ruhollah Khomeini - Life under Khomeini
In Iran, he is officially addressed as Imam rather than Ayatollah, ... the oppression by the "morality police" made life extremely difficult for those ...

Posted by: maz2 at March 30, 2009 12:22 PM

An interesting perspective on BNN this morning about the automobile industry's impact on the Canadian economy.

Percentage of Canada's GDP: 1.6%

Employees: 250,000

Canadian labour force: 16 million

Employees of Canadian industry as a fraction: One in 64.

Posted by: set you free at March 30, 2009 12:48 PM

"Obama's move against Wagoner hearkens back to September 2008 when President Bush's Treasury Secretary, Hank Paulson, insisted that AIG CEO Robert Willumstad step down as part of an $85 billion bailout of the insurance giant. Paulson installed in his place Edward Liddy, a former Allstate executive. The AIG bailout has since grown to about $170 billion and Liddy has faced calls for his resignation in the wake of reports about hundreds of millions of dollars-worth of bonuses the firm agreed to pay to employees."

Page 2 from a link to a link given above.

Posted by: ural at March 30, 2009 1:09 PM

Bonuses that would have been paid to AIG executives had the free market model be followed and the company fell into bankruptcy: Zero dollars.

Obama's solution: extract 3 trillion from the American taxpayer, which allows $168 million in bonuses to be paid.

Who's responsible for the bonuses, ural?

Posted by: set you free at March 30, 2009 1:15 PM

Why is everybody down on the Wagoner? I've got friends who've owned that particular Jeep for 30 years and it's still on the road.

Posted by: Yukon Gold at March 30, 2009 2:26 PM

A 10% drop in hybrid sales doesn't look so bad considering that all U.S. auto manufacturers are seeing overall sales drops from 30-50%.

In other news, Hummer sales are down 65% in 2009.

Next time do your homework please!

Posted by: Ryan at March 30, 2009 3:16 PM

GM needs to go bankrupt. What makes them any different from the airlines that serially have gone to bankruptcy court and re-emerged made whole again or not. It never cost taxpayers anything.

Posted by: penny at March 30, 2009 3:17 PM

KevinB very good analysis on the benefits side. The other big factor is the terms of plant closings. Employees were provided the opportunity to transfer to another factory/plant and maintain their position. If they refused, they were allowed to enter into a "job pool" that provided compensation/wages at a reduced level (60%, I think) until retirement and then the pensions you commented on took over. There was no mitigation clause that reduced or eliminated this benefit should the employee gain employment elsewhere. As a result, many affected individuals simply went to work for another auto manufacturer in the same position, effectively double dipping. These types of unsustainable benefits are major contributors to the downfall of the so called big three.

Posted by: Brian Mallard at March 30, 2009 3:52 PM

With Obama's help and guidance, Cadillac will be the new Lada!

Posted by: bobzorunkle at March 30, 2009 4:10 PM

A good many of you are fortunate enough to be looking at the problem from the outside looking in. It's interesting to see the many theories of those who not part of the inside loop. However, having dealt with GM and it's bureaucracy for over 20 years I think I sum up the big 3's problems in one sentence...

Too big to be willing to change to the market conditions.

To me from where I'm sitting, it's really that simple. I've seen how this elephant walks.

Posted by: the bear at March 30, 2009 4:45 PM

Posted by: c at March 30, 2009 4:54 PM

From a lot of comments on here . I take it their will not be a ground swell in sighing a formal oath of Loyalty to Obama by an Acorn apostle?
Just Imagine Canada, if Harper did such a thing. Now this guy thinks he's a financial wizard & hesitates not to use questionable powers over private citizens. My only surprise is not seeing Americans riot over becoming serfs by proxy by the uber CEO. The consummate community organizer himself. Obama! Yes we can !!!!!!! He is, every day.

Posted by: Revnant Dream at March 30, 2009 7:21 PM

Never forget that O'Bomb-a was democratically elected. People were warned and chose to elect him anyway. Let's be happy for them, especially the MSM which is getting hammered mercilessly by adverting drying up. Good on the CEEB too.

Posted by: sonofatilla at March 30, 2009 7:58 PM

What the financial industry did *right*, was to buy the federal politicians. The money they invested in the politicians was small compared to what they have gotten out of it. What the auto industry did *wrong* was *not* to buy any politicians. "Right" and "wrong" in this context require some redefinition, of course.

We must never forget that the US has one of the most corrupt governments in the world.

Posted by: John Lewis at March 30, 2009 8:17 PM


the "quality" of a NA car may be good today, but the industry spent many years working very hard to build up a reputation of building junk, so , they will not reverse this in a year or two

also some of these " american cars are as good or better than the japanese" is biased opinions from biased people

Posted by: GYM at March 30, 2009 8:44 PM

John Lewis, there was a time I'd have given you an argument about that. Now, I can't really object. It seems to be true. Saying the Democrats are -more- corrupt isn't much of a recommendation, frankly. How many drops of pee spoil the soup?

That's why I keep banging the drum for LESS government. It can be as crooked as it likes if it has no power to steal your money and curtail your freedom.

Posted by: The Phantom at March 30, 2009 9:05 PM

Glad I dumped my GM stocks. I guess the shareholders and board of directors no longer have any say in how the company is run.

Posted by: Pandora at March 30, 2009 9:38 PM

Favourite line of the day

Obambi forcing Chrysler to merge with FIAT....Fix It Again Tony!

This is all about ideology, people. The numbers don't matter to socialists, they don't care what the cost is. We see that with our precious NDP in Canada, and here is Obumble, practicing pure NDP doctrine......

When will America wake up from it's hypnosis?

Posted by: DanBC at March 30, 2009 9:39 PM

All the people with some "special insight into the automakers" who say they have been making bad decisions for decades, etc.

I have some bad news for you Wagoner was the exec that was turning it around he concentrated on the money making SUVs because up until the artificial wealth bubble burst that was what people were buying.

Small passenger vehicles could not be produced domestically to compete with imports/new domestic plants on trim and reliability. The price point was too low so they concentrated on trucks and larger vehicles where there was a profit margin.

Nobody saw this artificial oil price coming, it was a direct result of too much wealth having been created in the markets on the back of the real estate bubble, traders and fund managers ran out of places to put it where it could earn the 10% a year they were used to. That along with the Green Hype resurrecting the defunct Peak Oil theorists and calls for carbon free energy, the opportunity was perfect as India and China were on a tear.

There was a 3% cushion in available supply that analysts ignored because that was not the narrative they needed to jack the price, then as the price rose you saw a frenzy develop as they saw the earnings of big oil companies. Everyone wanted some of that!

It was that event that started the recession and killed the Automakers globally, hate to tell you that this is not just a domestic story, pick up a foreign newspaper once in a while.

Look at GM Stock in October 2007 it was over $40.

Not really the sign of a company being mismanaged into the ground. Yes they lost market share over the years but that will happen when you are being out produced and are dragging around 25 years worth of "Generous Motors" baggage and Foreign automakers were setting up shop, competition is GOOD but all pieces of the pie get smaller.

Wagoner did more to turn around the viability of GM than his predecessor and was well liked and respected by the unions, why he got fired was because he refused to kill off certain products in accordance with Obama's Green Fantasy Cars Vision.

Posted by: Illiquid Assets at March 31, 2009 3:39 AM

To Illiquid Assets,

I mentioned earlier that Wagoner was a clown. He wasn't. He did do a good job. The unions respected him and he was able to get a lot of concessions. However, money managers and people with shares in the company saw problems in that the value of shares dropped quite a bit and he was not moving fast enough to make changes. I haven't checked the GM stock but I know that it was over 80 bucks around 2000 and had been dropping for a long time. Wagoner as the CEO has to take the blame. I live very close to Oshawa and I know lots of GM workers and that they make outstanding vehicles and they have real pride in what they do. To me it's all management.

GM lost a lot of business due to their lack of respect for customers over the years (long before Wagoner was in charge). My first car as a kid was a new Pontiac 2000 in 1983 (the only year for this car - the next year it was called the sunbird). I had problems with my spark plug wires while under warrenty. They replaced one under warrenty. I had to go back to have a second one replaced - I said maybe you should replace the two remaining wires - they said they were okay. A few weeks later I had to go back and get my 3rd wire replaced - I said maybe you should replace the 4th one - they said it was okay. Lo and behold the 4th one failed - I went back and they acqused me of tampered with it and that it was therefore not under warranty - I had not touched anything - it would cost $48 bucks to replace. Even as a little kid I told them to get lost - I went to Canadian Tire - grabbed a complete set of wires and replaced everything myself for less than $48 bucks - and probably completely voided my warranty - I never had a problem again. I wrote a letter to the president of GM Canada - he actually got back to me and told me that I had tampered with the wires. Needless to say that I never bought or will buy a GM product again - nor will my family - which is small but it's over 20 cars. I switched to Ford and have been happy ever since.

Posted by: cconn at March 31, 2009 10:52 AM

I look at it this way, cconn and Illiquid. ALL the car makers are selling vehicles that cost a year's pre-tax pay. That's been the constant since forever. They design them that way.

Problem, real people can't save up a year's pre-tax pay in the life of a car anymore.

So, nobody can buy a car without credit. Pretty much the entice cost of the car is on credit. You start looking at total cost of ownership, a hefty chunk of your income is tied up in your wheels, leading to another reason for that difficulty with the saving, leading to more reliance on credit.

Now, under cover of the Cult of Safety and the Cult of the Environment, the Big Three managed to choke off all competition in North America. The Japanese manufacturers managed to bull their way in to the North American market because they got big enough back home, and thus they became part of the gang.

This was done in collusion with the US and Canadian governments, who basically wrote regulations nobody but the Big Three could meet. This accelerated in the 1980's to the fever pitch we see today, when cars have to be engineered to nearly aircraft-level tolerances.

Which is how they kept the price point so high. Its artificial.

I built a quite nice little race car for myself. Took me 6 months, learn by doing. Capable machine, hardy, good roll cage, good suspension etc. All off the shelf dune buggy stuff. I currently have about $6,000 in it, give or take a couple hundred bucks. If I went with brand-new everything, I could have still done it for under $20k.

That's one guy buying retail, hand assembled in the garage. A proper facility could crank them out for sale at under $10k all day long.

But nobody can, because of the regulations. Which is kinda fascism. Watery version, but still.

Comes the perfect storm of credit crunch, oil price and having the wrong cars tooled up. BANG, sales fall off a cliff, the Big Three can't crack their nut this year. Bush gives them a loan, to keep the scam intact. But its a big nut.

Now we have Bary, messiah of The West. He wants to run both sides of the scam at once. He wants to make the rules AND the cars, to his specifications, to please his supporters. Full on fascism.

So if I'm right about that, in the next little while we will see Government Motors shifting over to very expensive, very small hybrids and electrics to meet stringent new US EPA regulations and take advantage of brand new gas guzzler taxes. Add scrappage regulations to remove the backlog of used cars in the wrecking yards and dealerships, and you've got car Nirvana.

A government issue Volksmobile that extracts the maximum possible dollars from the populace, makes the big political donors happy, keeps the dinosaurian manufacturers stumbling along a heartbeat ahead of insolvency, and keeps those unions cowed and compliant.

Next up, household appliances and consumer staples. //

And to keep it all sliding smoothly, John F'ing Kerry is out there yesterday keeping the assault rifle ban alive. Gotta protect the Mexicans, y'know. Well, the Mexican government anyway. Car plants down there to keep safe.

Whole thing seems kinda crooked to me, know what I mean?

Posted by: The Phantom at March 31, 2009 11:45 AM

GYM, you are incorrect. Impala's & Malibu's are impeccable for their reliability. Not only that, when's the last time you saw a Tow-yota dealer in a town of 5000-6000?

Posted by: the bear at March 31, 2009 12:08 PM

The electric car died a natural death because of infernal combustion becoming more efficient than lead acid batteries. Battery technology has not improved significantly, and so the electric car remains a non-starter.

Currently, Bary the Messiah of all things good and fuzzy is trying to jazz some spark in the corpse of the electric car, in the hope that it will stumble about in Frankensteinian fashion long enough to get him the Greenie vote in 2010 and 2012, before going to ground again.

Batteries, inquisitive lefty. Batteries.

Posted by: The Phantom at March 31, 2009 1:44 PM

Phantom wrote: "Add scrappage regulations to remove the backlog of used cars in the wrecking yards and dealerships..."

Let's hope the total gun ban is implemented before this regulation...

Posted by: PiperPaul at April 1, 2009 12:03 AM