When ants need to cross some dangerous span in order to get to the thing they want, certain ants in the colony will sacrifice themselves to build a bridge that other ants can cross. That's how you get the honey. In GM's case, the honey is a $12 billion government lifeline. The dangerous span is, well, extinction. And the sacrificial ants in this case could be Pontiac, Saturn, and Saab.
Before the government would start writing checks (to the automakers, at least), Congress told GM (and Ford and Chrysler) to come back with a plan that gave some indication of long-term viability and a return to financial health. Supposedly, as part of such a plan, GM has looked at "shedding" the three brands in question, which would eliminate the massive costs associated with production, marketing and sales. But that would happen after massive payouts, some serious upheaval and tens of thousands of job losses. It would leave GM with Chevrolet, GMC, Buick, and Cadillac... which, since it's in ruthless survival mode, makes us wonder what kind of crush GM has on GMC. GM will release a 10-to-12 page plan to the public making its case and Congress has scheduled a hearing on the matter for December 5th.
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Detroit automakers are busy putting the final touches on its Congress-bound revitalization plans, but all three automakers are also making plans in the event government loans are turned down. GM has a back-up plan, and it reportedly includes more factory closures, white-collar cutbacks, further slashed marketing budgets, and delayed product introductions. Automotive News is reporting that cuts also could hit research and development, which would further hurt the General's ability to compete for global vehicle sales. That's not a good option, but we're guessing it's better than running out of cash and declaring bankruptcy.
GM has already taken billions of dollars out of of its operating costs over the past year, with thousands of job and production cuts, plant closings, and the sale of non-core assets. Those actions were thought to be enough to stem the General's cash burn, but when car sales came to a screeching halt in the third quarter, it became apparent that more serious reductions were needed. GM, Ford, and Chrysler go back to Congress on December 8th to plead its case for low cost government loans. If that meeting goes as well as the first one, plan B may actually see the light of day.
Jaguar and Land Rover are having a Hell of a time trying to sell luxury vehicles in this armpit of a global economy, and parent company Tata Motors is looking for a big-time loan to keep the British Marquees afloat. In all, Tata is seeking £1 billion from the British government to to help pay the bills. That's a fairly large sum considering that it represents £67,000 to each of the British marquees 15,000 workers in the UK. Prime Minister Gordon Brown is said to be close to a decision regarding the loan, though it's likely the money would come with a stipulation that protects workers in the UK.
We'd say that sales at Jaguar and Land Rover vehicles are in really bad shape, but the truth is that we don't even know how bad things have gotten. Tata has decided to stop providing US sales data for its struggling luxury brands.
President-Elect Barack Obama has been in favor of assisting Detroit automakers, but the soon-to-be Commander in Chief agrees with a Congressional demand to see concrete plans before any checks are signed. Obama's Cheif of Staff, David Axelrod, was all over the boob tube Sunday sharing the President Elect's thoughts on what the industry needs to do, saying a real plan to "retool and rationalize" is needed. Without a solid plan, Axelrod said there is little taxpayer dollars can do to fix the problem. House Speaker Nancy Pelosi added that she hopes the automakers have "gotten the message" about the need for a plan, which is due to Congress by December 2nd.
Axelrod also took a bit of a shot at the Detroit execs when he said that they need to "take a commercial flight" to discuss the plan on December 8th. We'd take that a step further and suggest that the three automakers get in their most fuel efficient vehicles and take a drive to our nation's capital.
What do failing banks and foreclosed houses have to do with race tracks? A lot, apparently, if you're Charles Schumer. The New York Senator added an earmark to the nation's $700 billion "rescue plan" that will extend current tax laws for race tracks that allow them to be considered the same as amusement parks in the eyes of the IRS. As long as that's the case, track facilities can write off improvements to their concession stands, parking lots and the tracks themselves over a seven-year period rather than 15 years. On the surface this sounds like small potatoes, but adding up the numbers reveals that the tracks will save $100 million in taxes by writing off improvements over a shorter span of time. That means less of the earnings from each of those seven years will go towards taxes, helping the track owners achieve a higher annual profit in the short term. The race track earmark wasn't in the House bill that got shot down last week, but was added by Senator Schumer to the 450-page bill, along with a number of other earmarks by other senators, to attract a few more Yes votes when the bill returned to the House of Representatives. It must have worked, as the House passed the bill today by a vote of 263-171 and it was signed into law by President Bush this afternoon. We feel rescued already.
While the U.S. banking industry is still waiting for Congress to give it a $700 billion hand, President Bush signed into law last night the spending bill that gives U.S. automakers $25 billion in loans to get their collective act together. But unlike when a bank deems you worthy of their money, the Big Three won't be getting any cash for some time. Despite the companys' CEOs saying repeatedly how they were desperate for help and how automotive life as they know it would end if they didn't get financial help, there's at least a 60-day delay until they can cash this check. Written into the bill is a clause requiring the Energy Department to come up with regulations that will determine who gets what and when. The agency has 60 days to do this, but could take much longer, as much as 18 months according to a department spokesperson. Desperate or not, looks like GM, Ford and Chrysler are now at the mercy of the Energy Department.
Over the past few weeks, we've heard how badly Detroit automakers needed $25 billion in government-backed loans, but very few of us know exactly who gets the money. GM CEO Rick Wagoner got in front of a camera to answer some of those questions, and to talk about some of the challenges the General faces. Some of the interesting comments from slick Rick include the fact that the $25 billion is available to all automakers and suppliers that invest in the US, not just the Detroit companies. Wagoner also explains that the loan money was part of the bill passed in 2007 to increase fuel economy by 40% over the next decade, and not just some handout from Washington. Hit the jump to view the video.
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California recently banned talking on cellphones, and then followed up by making texting illegal, while driving. For a moment there, it was looking like all you were going to be able to do behind the wheel in California was, you know, drive. But thanks to the dedication of Governor Schwarzenegger, individual freedoms have not been extinguished. Promising to only sign bills that are "the highest priority for California," Arnie vetoed a bill that would ban driving with dogs in your lap. While we understand the spirit of the veto -- California does have much bigger issues to deal with than lapdogs -- we do sometimes wonder why a 40-pound kid has to be in a child seat, but a 40-pound, unpredictable animal can take a nap between you and the steering wheel.
What's up with California's lawmakers? First, they pass legislation that makes it illegal to use cell phones while driving, yet texting while behind the wheel is still legal (thankfully rectified earlier this week). Now they get caught with unchecked, taxpayer-reimbursed, unlimited-use gas cards...while driving state-issued vehicles! The "gas cards" are supposed to be used for fuel, but they can also be used for incidental purchases such as snacks or drinks. The lawmakers never see the bills as they are sent directly to the Senate and Assembly rules committees for payment. According to the National Conference of State Legislatures, the golden state of California is unique with this program -- in most other states (not facing $15 billion budget deficits) lawmakers must submit expense forms for gas. Yeah, just like the rest of us do...
If residents in several cities in Clark County, Washington want to get their cars clean, they could soon be forced to do it at retail car washes. According to an employee at the Washington state Department of Ecology, the state wants "people to make the connection of 'what goes on the street goes into the creek.'" And soapy car wash residue is something they don't want in the creek. The state wants the cities to come up with a way to keep any water that isn't rain water from getting into the environment without being treated. The cities, about a dozen in all, say that's crazy, and have threatened to sue the state for trying to enact measures that exceed federal Clean Water Act. The state suggests that if people still want to clean their cars, that they don't use soap with phosphorus, and wash their cars on gravel or grass where the water will be filtered by the soil. That's ironic, because part of the state's measure also requires sprinkler water to be captured and treated. Residents could always try the state's other option: don't use soap at all.
