Changing the Auto Industry from the Wheels Up

by Dollars and Sense

We just posted a new web-only article on the auto industry, by Alejandro Reuss of the D&S collective. Here is the introduction to the article:

Changing the Auto Industry from the Wheels Up

The problems of the U.S. auto industry call for radical solutions.

By Alejandro Reuss | Dollars & Sense | May 13, 2009

The "Big Three" U.S. auto companies are not facing a crisis – they are facing multiple interrelated crises at once. Chrysler, General Motors, and Ford have posted tens of billions in losses over the last few years. They suffer from chronic overcapacity, producing more cars than they can sell, and have ended up selling cars at a loss. Their cars are widely viewed as lagging behind those of international competitors in quality, styling, and reliability. They have focused on fighting fuel-efficiency standards rather than developing new, fuel-efficient vehicles. They have bet heavily on large, gas-guzzling models and are playing catch-up Toyota and Honda in the development of hybrid cars. They face significant cost disadvantages compared to their main competitors, mainly due to retiree health and pension "legacy costs." And, on top of all this, a deep recession has hammered car sales.

Already operating in the red before last year, the Big Three have been burning through billions in cash reserves during the current recession. General Motors, having posted losses every year since 2005, lost over $30 billion in 2008. It has reported that, in the first quarter of 2009, it lost another $6 billion (and depleted its cash reserves by over $10 billion). Ford has posted losses since 2006, including about $15 billion in 2008. Chrysler lost $8 billion last year. With their companies teetering on the edge of bankruptcy, GM and Chrysler executives appeared before Congress last November asking for a government bailout. In December, the Bush administration announced $13.4 billion in loans for GM and $4 billion for Chrysler. (Since then, both companies have asked for billions more.) In April, the Obama administration offered additional loans of one-half billion to Chrysler and up to $5 billion to GM. Lacking private sources of financing, the two companies have managed to stay in business this long thanks only to the government loans.

The government has required both companies to submit restructuring plans, including concessions from workers and creditors, as a condition of the bailouts. At the end of March, the Obama administration rejected the submitted plans as inadequate. It gave Chrysler 30 days more to conclude a takeover deal with Italian auto giant Fiat, while GM got 60 days to submit a new restructuring plan. In late April, Chrysler appeared to have a deal with Fiat, with the Italian automaker set to take over operations and receive 20% of the company's stock (with a possible future increase to 35%). A United Auto Workers (UAW) retiree health-care trust would own 55% of the stock. The UAW accepted new concessions on wages and benefits, while the company's major creditors agreed to cancel billions in debt for about a third of its face value (plus less than 10% of the company's stock). When some creditors balked at the plan, however, the company filed for bankruptcy. Meanwhile, GM proposed a restructuring plan in which the federal government would own 50% of the stock (in exchange for the cancellation of about $10 billion in company debt), and the UAW retiree health-care trust nearly 40%, leaving the company's unsecured bondholders with just 10%. The plan included the shutdown of the company's Pontiac division and over 20,000 layoffs. Bondholders could still balk, however, in which case GM would go into bankruptcy as well.

No matter what the outcome of the current crisis, the "Big Three" are not likely to return to the heights of their post-World War II heyday. In the 1950s and 1960s, the Big Three dominated the U.S. auto market. As recently as the late 1990s, they accounted for over 70% of total U.S. sales of new cars and light trucks. Now, they account for less than 50%. In the mid 1950s, General Motors alone accounted for over 50% of U.S. new-car sales. Today, the company's market share is about 20%. Under the company's proposed restructuring plan, it would employ less than 40,000 union auto workers, less than one tenth the number the company employed at its peak in 1970. There is no way to put Humpty-Dumpty together again, and it does not seem that any of the major players in this drama—the companies' managements, the leadership of the UAW, or the government—really believe that there is. The real question is whether something new and better will be built from the wreckage of this industry.

Read the rest of the article.

Labels: auto industry, Chrysler, ford, General Motors, UAW, VEBA

 

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5/13/2009 04:36:00 PM 1 comments

 

UAW Reaches Deal With Ford

by Dollars and Sense

From the wires. Ford hasn't received bailout money, but pressed the union for concessions because they didn't want to be disadvantaged if the union made concessions with Chrysler and GM. The deal still needs to be ratified by the union.

DETROIT – The United Auto Workers and Ford Motor Co. said Monday they agreed to let the automaker change how it pays for a health care trust fund for retired workers, a deal that could serve as the model for cash-starved General Motors Corp. and Chrysler LLC.

Ford said the agreement allows it to make payments to the union-managed trust with up to 50 percent of company stock instead of cash. Having the UAW take equity frees up cash for operations.

"We will consider each payment when it is due and use our discretion in determining whether cash or stock makes sense at the time, balancing our liquidity needs and preserving shareholder value," said Ford spokesman Mark Truby in a written statement.

Ford, like its Detroit and foreign competitors, is seeing a huge drop in sales as consumers shy away from purchasing new cars during a recession. However, the company has not asked for low-interest government loans. General Motors and Chrysler have asked for a total of $39 billion, and have received $17.4 billion so far.

Under terms of the government loans, the Treasury Department set targets for Chrysler and GM to exchange half their cash payments to the trusts, called voluntary employee beneficiary associations, or VEBAs, for equity in the companies. Money freed up by supporting the VEBA with equity would potentially pare down GM's and Chrysler's borrowings from the government.

For Ford, which isn't receiving government aid but is trying to cut costs, the agreement announced Monday is another in a series of concessions from auto workers.

Terms of previous deals were not announced, but they were expected to eliminate the jobs bank in which laid-off workers get most of their pay, as well as lift work rules and make other changes that the government loan terms set out. The goal is for the companies' labor costs to be competitive with Japanese rivals that have U.S. factories.

The UAW, meanwhile, said the health care trust deal helps save jobs, as a failure to help the auto companies cut costs could lead to a bankruptcy filing and massive layoffs.

Although Ford was not required to renegotiate terms of its VEBA with the UAW, the company entered talks with the union, and said it would not be "disadvantaged" as GM and Chrysler sought concessions.

The VEBAs were established as part of the landmark 2007 contract reached with the UAW. The trusts would pay health care bills for about 800,000 UAW retirees, spouses and dependents and move billions in liabilities off the companies' books. GM expects to save about $3 billion a year, while Ford says it will save $1 billion annually.
Ford owes $6.3 billion to its VEBA at the end of this year. GM has to pay roughly $20 billion into its health care trust, while Chrysler must pay around $9.9 billion.

The UAW's willingness to strike a deal with Ford first is significant, because it shows the union is acknowledging the challenges Ford is facing, said Hal Stack, director of the Labor Studies Center at Wayne State University in Detroit.

"The question is whether they make a similar agreement with GM and Chrysler," he said. "It adds a certain element of risk to the equation for the UAW at a time when most people are nervous about any (financial) risk."

The agreement between Ford and the UAW, along with other previously agreed to concessions, must be ratified by union members. The UAW is expected to meet with heads of its local branches this week. The change to the health care trust also requires court approval.

Full story here.

Labels: auto industry, auto industry loans, Chrysler, ford, GM, UAW

 

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2/24/2009 04:42:00 PM 0 comments

 

Big Three Spent $30 Million on Lobbying in '08

by Dollars and Sense

From Bob Feldman:

If you check out the Center for Responsive Politics, you'll notice that General Motors, Ford, and DaimlerChrysler have already spent $20 million in 2008 on lobbying Congress, the White House and federal government agencies to serve their special transnational corporate interests. GM, for example, spent over $10 million on lobbying the federal government in 2008, while Ford and DaimlerChrysler each spent over $5 million on lobbying federal agencies, the U.S. Congress and the White House in 2008.

In addition, during the 2008 election cycle, U.S. automobile industry political action committees (PACs) and U.S. automobile industry executives made over $14.6 million in campaign contributions to Democratic or Republican candidates for federal office. To see a list of all the Members of Congress who accepted campaign contributions from the U.S. automobile industry in 2008, click here.

--bf

Labels: auto industry, bailout, Bob Feldman, Center for Responsive Politics, Chrysler, financial crisis, ford, General Motors

 

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11/21/2008 01:05:00 PM 0 comments

 

More Bad News For Automakers

by Dollars and Sense

Billionaire investor Kirk Kerkorian is cutting his losses by shedding part of his 6.49% stake in Ford Motor Company, and has announced that he will sell of the remainder of his holdings in the near future. Starting in April, Kerkorian began buying up about $1 billion worth of Ford stock. As of Tuesday, his holdings were worth less than $290 million, a loss of 71%.

Like other US automakers, Ford is facing trouble from all sides: tightened consumer spending, a growing distaste for gas-guzzling SUVs, and a frozen credit market. According to the LA Times, Ford and GM are each burning through $1 billion a month in scarce cash just to keep going.

Adding another blow to Detroit's desperate hope for a quick fix, the Washington Post reports that US automakers may not see any of the recently approved $25 billion government loan program for more than a year. The emergency loan, the largest government support of the US auto industry since the 1979 Chrysler bailout, was enacted to help Detroit automakers switch to more energy-efficient vehicles. However, carmakers have been counting on it to tide them over until the credit markets begin to thaw.

Labels: auto industry, bailout, Chrysler, credit crisis, ford, GM, Kirk Kerkorian

 

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10/22/2008 11:18:00 AM 0 comments

 

Corporate Security

by Ben Greenberg

Bad government has been good business during the Bush administration. In 1999, nine companies had federal homeland security contracts. Today the total is over 33,000. "Much of what we've seen touted by vendors after 9/11," says security consultant Doug Laird, "is nothing more than a sales force trying to use 9/11 as the hype to get poorly advised folks to buy their products."

But mismanagement and graft are just part of the story. Telecom companies' involvement in illegal government spying, outsourcing of torture to contractors, Haliburton constructed jails for mass detentions in the event of an "immigration emergency"---are just some examples of public/private partnerships in which the private sector has a special role in advancing abuses of government power.

Matthew Rothschild's recent story in The Progressive reveals that the private sector now plays an integral role in the transformation of America into an "endemic surveillance society" (h/t Marshall Kirkpatrick).

Today, more than 23,000 representatives of private industry are working quietly with the FBI and the Department of Homeland Security. The members of this rapidly growing group, called InfraGard, receive secret warnings of terrorist threats before the public does—and, at least on one occasion, before elected officials. In return, they provide information to the government ...

InfraGard is “a child of the FBI,” says Michael Hershman, the chairman of the advisory board of the InfraGard National Members Alliance and CEO of the Fairfax Group, an international consulting firm...

“We are the owners, operators, and experts of our critical infrastructure, from the CEO of a large company in agriculture or high finance to the guy who turns the valve at the water utility,” says Schneck, who by day is the vice president of research integration at Secure Computing.

“At its most basic level, InfraGard is a partnership between the Federal Bureau of Investigation and the private sector,” the InfraGard website states. “InfraGard chapters are geographically linked with FBI Field Office territories.”

In other countries, for decades, cooperation between US industries and government has gone much further. In Argentina, for example, the Ford Falcon automobile is emblematic (PDF) of government terror. In the 1970s,

the Ford Falcon was the car of choice used by police, military and paramilitaries alike. Ford’s exclusive contracts with the Argentine security forces throughout the dictatorship eventually made the Falcon the single most recognizable icon of repression, one that clearly still resonates today. “Whenever a Falcon drove by or slowed down, we all knew that there would be kidnappings, disappearances, torture or murder,” reflects renowned Argentine psychologist and playwright Eduardo “Tato” Pavlovsky in a recent article. “It was the symbolic expression of terror. A death-mobile.”

The terror has continued into the present:

At noon on March 4, 2005, a green Ford Falcon pulled up next to a woman in Centenario, a municipality of Neuquén, in southern Argentina. Three men and a woman forced her into the car and then spent the next several hours threatening, torturing and mutilating her. The victim, whose name has been kept secret, was the wife of an employee at the Cerámica Zanon tile factory, one of the flagship worker-controlled enterprises that have sprung up in Argentina since the 2001 crisis. While the Zanon workers have successfully resuscitated the plant, they have also faced growing intimidation, as exemplified by this attack. The victim’s abductors released her with the message: “This is for Zanon. Tell them that the union will run with blood…. You’re all going to have to move into the factory because we’re going to kill all of you.”

Ford in Argentina is just one example among many. Coca Cola, to name another, has a long, insidious history in Columbia of contracting paramilitary forces that have murdered and tortured union activists.

In Latin America it is clear that these partnerships are part of an explicit war on organized labor and the culture that grew from developmentalist economies (PDF) in the 1950s and 60s. And a further crackdown on US labor may also be the promise of InfraGard.

FBI Director Robert Mueller addressed an InfraGard convention on August 9, 2005.... “Those of you in the private sector are the first line of defense.”

He urged InfraGard members to contact the FBI if they “note suspicious activity or an unusual event.” And he said they could sic the FBI on “disgruntled employees who will use knowledge gained on the job against their employers.”

Outside the US, American corporations are in many ways independent entities not bound by US laws or by the laws of the countries where they operate. Increasingly, there is a class of American citizens who enjoy similar status within the US boarders.

One of the advantages of InfraGard, according to its leading members, is that the FBI gives them a heads-up on a secure portal about any threatening information related to infrastructure disruption or terrorism.

The InfraGard website advertises this. In its list of benefits of joining InfraGard, it states: “Gain access to an FBI secure communication network complete with VPN encrypted website, webmail, listservs, message boards, and much more.”

InfraGard members receive “almost daily updates” on threats “emanating from both domestic sources and overseas,” Hershman says.

“We get very easy access to secure information that only goes to InfraGard members,” Schneck says. “People are happy to be in the know.”

On November 1, 2001, the FBI had information about a potential threat to the bridges of California. The alert went out to the InfraGard membership. Enron was notified, and so, too, was Barry Davis, who worked for Morgan Stanley. He notified his brother Gray, the governor of California.

“He said his brother talked to him before the FBI,” recalls Steve Maviglio, who was Davis’s press secretary at the time. “And the governor got a lot of grief for releasing the information. In his defense, he said, ‘I was on the phone with my brother, who is an investment banker. And if he knows, why shouldn’t the public know?’ ”

Maviglio still sounds perturbed about this: “You’d think an elected official would be the first to know, not the last.”

Worse, there are indications that this special class of citizens may be the enforcers of martial law, with permission to shoot to kill.

One business owner in the United States tells me that InfraGard members are being advised on how to prepare for a martial law situation—and what their role might be. He showed me his InfraGard card, with his name and e-mail address on the front, along with the InfraGard logo and its slogan, “Partnership for Protection.” On the back of the card were the emergency numbers that Schneck mentioned.

This business owner says he attended a small InfraGard meeting where agents of the FBI and Homeland Security discussed in astonishing detail what InfraGard members may be called upon to do.

“The meeting started off innocuously enough, with the speakers talking about corporate espionage,” he says. “From there, it just progressed. All of a sudden we were knee deep in what was expected of us when martial law is declared. We were expected to share all our resources, but in return we’d be given specific benefits.” These included, he says, the ability to travel in restricted areas and to get people out.

But that’s not all.

“Then they said when—not if—martial law is declared, it was our responsibility to protect our portion of the infrastructure, and if we had to use deadly force to protect it, we couldn’t be prosecuted,” he says.

Rothschild has substantial confirmation of this report from two other sources, as well.

Often using unreliable informants and guilt by association, the mid-20th century US government placed large numbers of its citizens on the Security Index, which qualified them to lose their rights and be rounded up and jailed en masse, upon declaration of martial law. Even if the FBI found that a subject did not qualify for the Security Index, it was nearly impossible to have one's name removed from the lists of those to be imprisoned without charges—unless one agreed to inform on others.

The canceled Security Index cards on individuals taken off the Index after 1955 were retained in the field offices. This was done because they remained “potential threats and in case of an all-out emergency, their identities should be readily accessible to permit restudy of their cases.” These cards would be destroyed only if the subject agreed to become an FBI source or informant or "otherwise indicates complete defection from subversive groups."

(Book III of the Final Report of the US Senate Select Committee to Study Governmental Operations With Respect To Intelligence Activities, 1976)

The odd twist of InfraGard is to recruit informants through the promise of placing them above the law rather than through threatening them with a possible loss of their rights.

At least through the mid-1960s, predominantly working class Klansmen enjoyed relative impunity as they murdered, bombed, burned, raped, shot and beat Blacks and their allies to maintain a social and economic order that kept them---the violent whites---poor as well.

Today, it seems the mantle of violence with impunity is being handed to an owning class elite.

To join, each person must be sponsored by “an existing InfraGard member, chapter, or partner organization.” The FBI then vets the applicant. On the application form, prospective members are asked which aspect of the critical infrastructure their organization deals with. These include: agriculture, banking and finance, the chemical industry, defense, energy, food, information and telecommunications, law enforcement, public health, and transportation....

Curt Haugen is CEO of S’Curo Group, a company that does “strategic planning, business continuity planning and disaster recovery, physical and IT security, policy development, internal control, personnel selection, and travel safety,” according to its website. Haugen tells me he is a former FBI agent and that he has been an InfraGard member for many years. He is a huge booster. “It’s the only true organization where there is the public-private partnership,” he says. “It’s all who knows who. You know a face, you trust a face. That’s what makes it work.”

It's the Good Ol' Boys Network 2.0---enlisted for the class war. Look, they're even on Facebook.

[Cross-posted on Hungry Blues.]

Labels: argentina, coca cola, columbia, domestic spying, fbi, ford, haliburton, infragard, klan, martial law

 

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2/19/2008 02:14:00 AM 1 comments