RKMBs Forums .::Important::. Politics and Current Events Democrat Leaders Want Automaker Bailout

General Motors Corp., surviving on $13.4 billion in government aid, spent $2.8 million on lobbying during the first three months of 2009, according to disclosures filed yesterday with the U.S. House and Senate.

“Like any quarter, our reporting and expenses reflect the level of activity that we’re engaged in, and the breadth of issues that affect our business,” Greg Martin, a GM spokesman, said. “As being part of what is arguably one of the most- regulated industries in the country, you have a voice to add to complex policy discussions and you report it.”

Spending by the biggest U.S. automaker was down from $4.1 million the carmaker spent in the same period a year earlier.

Detroit-based GM is trying to cuts costs for labor, health care and debt to meet a June 1 deadline for avoiding bankruptcy.

Auburn Hills, Michigan-based Chrysler LLC, also relying on U.S. funds to avoid bankruptcy, reported lobbying expenses of $720,658 between January and March, 47 percent less than the $1.4 million that the carmaker spent during the same three-month period a year earlier.

Chrysler, the third-largest U.S. automaker, received $4 billion from the government in January and has a May 1 deadline to create an alliance with Italian automaker Fiat SpA in order to receive up to $6 billion more in U.S. assistance.

Chrysler is spending “to educate policy members about the company and the future of the automotive industry,” Todd Goyer, a Chrysler spokesman, said in a statement. “There is significant demand for education and information regarding Chrysler from legislators and government officials.”

The expenditures were for “a wide range of issues,” including energy policy, development of electric and fuel- efficient vehicles, taxation, health care, trade and international affairs, he said.

The top 10 recipients of the government's $700 billion financial bailout spent about $9.5 million on federal lobbying during the first three months of the year.

The biggest spender was bailed-out automaker General Motors Corp., which devoted $2.8 million to lobbying in the first quarter of 2009. It has received $13.4 billion in government loans and could get $5 billion more, according to a government report released Tuesday.

Failed insurance giant American International Group Inc. and banks Citigroup Inc. and JPMorgan Chase & Co. each reported spending more than $1 million to influence the government as they lived off federal money this year. AIG has gotten $40 billion from the bailout fund, while Citigroup has received $50 billion and JPMorgan $25 billion.

The lobbying activity was revealed publicly in reports required to be filed with Congress. This year's first quarterly report was due Monday.

Other major recipients of money from the so-called Troubled Assets Relief Program were Bank of America Corp., which reported spending $660,000 lobbying while receiving its $45 billion in help; Wells Fargo & Company, with $700,000 in lobbying costs and $25 billion in bailout money; Goldman Sachs, which spent $670,000 while receiving its $10 billion; and Morgan Stanley, which spent $540,000 while also getting $10 billion in assistance.

PNC Financial Services Group, spent $135,000 — nearly double what it did at the end of last year — on lobbying while receiving a $7.8 billion lifeline, while U.S. Bancorp spent $170,000 on lobbying and got $6.6 billion in government aid.

The reports suggest that most of the bailed-out companies have beefed up their lobbying at least marginally since last year. Seven spent more to influence the government than they did in the last quarter of 2008.

The largest increases apart from PNC were by Goldman, which spent 34 percent more on lobbying than it did at the end of last year; Wells Fargo, which spent about 21 percent more, and JPMorgan, which lobbied 19 percent more. AIG also devoted some 16 percent more money to interacting with the government, despite the "no-lobbying" policy it adopted late last year after receiving repeated bailouts.

AIG said in its filing that it still had to spend considerable resources contacting officials during the first three months of the year. The communication was "in response to requests and to correct misinformation," the company reported. "Consistent with AIG's lobbying policy, the company did not engage in any lobbying with respect to federal legislation in the first quarter of 2009."

The disclosures also show that AIG has fired several lobbyists since the beginning of the year, including from the powerhouse firm Akin Gump Strauss Hauer & Feld, the prominent Republican company DC Navigators and The Washington Tax Group.

Among the companies that reduced their lobbying activity were Bank of America, which slashed its costs about 20 percent, and GM, which spent 15 percent less than during the last quarter of 2008.

David Kellermann, the acting chief financial officer of mortgage giant Freddie Mac, was found dead at his home Wednesday morning in what police said was an apparent suicide.

Mary Ann Jennings, director of public information for the Fairfax County, Va., Police Department, said Kellermann was found dead in his Reston, Va., home. The 41-year-old Kellermann has been Freddie Mac's chief financial officer since September.

Jennings said that a crime scene crew and homicide detectives were investigating the death, but that there didn't appear to be any sign of foul play.

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Kellermann was named acting chief financial officer in September 2008, after the resignation of Anthony "Buddy" Piszel, who stepped down after the September 2008 government takeover. The chief financial officer is responsible for the company's financial controls, financial reporting and oversight of the company's budget and financial planning.

Before taking that job, Kellerman served as senior vice president, corporate controller and principal accounting officer. He was with Freddie Mac for more than 16 years.

The Treasury is preparing a Chapter 11 bankruptcy filing for Chrysler LLC that could come as soon as next week, The New York Times reported on Thursday, citing people with direct knowledge of the matter.

The Treasury has an agreement in principle with the United Auto Workers union to protect pensions and retiree health care benefits as a condition of the bankruptcy filing, the paper said.

Italy's Fiat would finalize its alliance with Chrysler while the U.S. automaker is under bankruptcy protection, the paper reported.

Chrysler has until April 30 to complete its partnership with Fiat and win concessions from its first-lien lenders and the UAW, or face a cut-off of government funding and a potential bankruptcy.

The Times said U.S. and Canadian governments were prepared to provide the financing that Chrysler needed to operate while under bankruptcy protection.

Chrysler was not immediately available for comment.

Ford Motor Co posted a smaller-than-expected first-quarter loss and said it was on track to at least break even in 2011 and did not expect to seek U.S. government loans, sending its shares up more than 22 percent.

The company also said on Friday that it had burned through $3.7 billion of automotive sector cash in the first quarter, a sharp drop from the second half of last year, and ended March with $21.3 billion in gross cash.

Ford posted a net loss of $1.43 billion, or 60 cents per share, for the first quarter, compared with net income of $70 million, or 3 cents per share, a year earlier.

The loss from continuing operations and excluding one-time items came to 75 cents per share. Analysts on average expected a loss of $1.23 on that basis, according to Reuters Estimates.

"Our results in the first quarter reflected the extremely difficult business environment and weak demand for autos around the world," Chief Executive Alan Mulally said in a statement.

Still, Chief Financial Officer Lewis Booth called the results encouraging and said the automaker expected the first quarter to have the worst cash burn of the year.

Ford had burned through $21 billion of automotive cash in 2008.

"It looks like positive headlines," said Robert Finkel, vice president equity trading, U.S. equity trading, at Stifel Nicolaus Capital Markets. "I know the focus has been on the cash burn rate."

Rather than the quarterly results, investors are more focused on Ford's liquidity, its full-year outlook for U.S. auto industry sales and its ability to navigate the economic downturn. The struggles of rivals General Motors Corp and Chrysler are at the center of Wall Street's attention.

Ford has not sought U.S. government aid, setting it apart from GM and Chrysler, which are operating on $17.4 billion of federal loans and have sought more to stave off bankruptcy.

Booth said Ford risked being at a disadvantage if GM or Chrysler should file for bankruptcy, but the automaker has been preparing contingency plans should such a filing lead to disruptions in its parts supply base.

Ford posted a 2008 net loss of $14.7 billion, a company record, and has reported losses of about $30 billion over the past three years. The turnaround plan would have it at least break even in its pretax automotive operations in 2011.

The automaker borrowed more than $23 billion in late 2006 to support the restructuring in case of an industry downturn, using most of its remaining assets, including the familiar blue oval logo, as collateral.

In the first quarter, special items increased Ford's pretax profits by 15 cents per share, with gains from a debt restructuring offsetting a $700 million impairment charge for the Volvo car unit.

Ford classified the Swedish Volvo brand as held for sale, which implies that there is a probability of a sale in the next year. The charge pushes the book value of the business down to what Ford believes is the estimated fair market value.

Ford has been in discussions with potential buyers for the brand, the last one left from its former premier auto group. It previously sold Aston Martin, Jaguar and Land Rover.

The automaker also said it was raising its second-quarter production forecast by 10,000 units in North America to 435,000 vehicles. However, that is still down some 250,000 vehicles from its production a year earlier.

Ford shares were up 22.5 percent at $5.50 in trading before the market opened. They have risen from a 27-year-low of $1.02 in November, when automakers were in the process of appealing for emergency loans.

Taxpayers invested another $2 billion in General Motors Corp. this week as the struggling auto giant continued efforts to restructure and avoid bankruptcy court.

The Treasury Department said Friday it lent the additional money to GM on Wednesday to provide working capital. The loan pushes the total amount of GM's government aid to $15.4 billion after the company said it would need more money in the second quarter to stay afloat.

A government report revealed earlier this week that the Treasury was prepared to provide GM with up to $5 billion more in federal loans and Chrysler with up to $500 million more in bailout support as they race against deadlines to restructure.

GM has until June 1 to complete restructuring plans that satisfy the government's auto task force, while Chrysler has until Thursday to finish restructuring and ink an alliance with Italy's Fiat Group SpA.

GM, in a restructuring plan filed with the government in February, had said it would need $2 billion more in federal loans in March and another $2.6 billion in April. But last month Chief Financial Officer Ray Young said the company's expense cuts helped to hold off the need for the March installment.

GM CEO Fritz Henderson said last week that the automaker would need $4.6 billion during the second quarter.

In addition to the $15.4 billion, the automaker's financial arm, GMAC Financial Services, has received $5 billion in government aid, plus GM received a $1 billion loan to buy more equity in GMAC.

GM had requested a total of $30 billion, and it's unclear just how much of that the government is willing to give.

The company said in a statement that it appreciates the Obama administration's support "as we undertake the difficult but necessary actions to reinvent our company."

In order to get more loans, the government's auto task force is requiring GM and Chrysler to swap part of their large debt for equity, cut unprofitable models, reduce labor costs and complete other restructuring steps.

GM faces a June 1 deadline to complete the tasks for enter bankruptcy protection. Chrysler's deadline is Thursday. If Chrysler can't reach a deal with Fiat by then, it likely will be auctioned off in pieces because no more government funding would be made available.

Taxpayers invested another $2 billion in General Motors Corp. this week

The survival of Chrysler as an independent company is looking increasingly unlikely.

The fundamentals of its business structure - unappealing passenger cars, dismal quality, little technology, minimal international operations - are scary enough. Meanwhile, continuous rounds of layoffs have hollowed out the company, starving it of the basic resources it needs to engineer, manufacture and market automobiles.

One executive described Chrysler as looking like an imposing castle from the outside, but actually being empty once you got beyond the front door.

Now debt-holders are balking at government demands to take a haircut, car sales show no signs of improving, and the government's May 1 deadline for demonstrating viability is fast approaching. Having escaped bankruptcy in the late '70s and again in the early '90s, Chrysler appears to have run out of options.

Fiat, once held out as Chrysler's last hope, no longer needs to go through the trouble of a formal takeover. It could easily cherry-pick the company's assets in a liquidation. It would cost the Italian automaker a few bucks more, but it would be a lot cheaper in the long run.

So what happened to Chrysler?

While General Motors has been on a slippery slope for 40 years, the roots of Chrysler's decline are more recent. At the time of its merger with Daimler in 1998, it was the hottest company in Detroit.

With its dream team of engineers, designers, and marketers, Chrysler had created a high-profit lineup of minivans, pickup trucks and Jeeps. At one point, its CEO, Robert J. Eaton, was fantasizing about 20% market share and 8% profit margins. Mixing in Daimler's technical resources, global reach, and the always-tantalizing benefits of synergy should have created a Chrysler recipe for success.

But the Germans hamstrung their new American unit more than they helped it. Their formal business structure clashed with Chrysler's more freewheeling ways and promised resources took a long time to make their way from Stuttgart to Auburn Hills.

And Chrysler made plenty of mistakes on its own. The dream team disbanded, engineering costs skyrocketed and an ill-conceived efficiency program hurt vehicle quality and customer appeal.

In retrospect, the fatal blow was struck when then-CEO Dieter Zetsche tried to stretch the product development budget by churning out more new models with less money. It sounded like black magic -- and as it turned out -- it was.

What Chrysler produced were half a dozen derivative models with eye-catching but cheesy styling, bargain- basement interiors and the worst quality in Detroit. Customers caught on quickly. This year, sales of many models are just one-third of what they were just a year ago:

-- 3,186 copies of the square-cornered Jeep Commander, derided as the box that the smaller Grand Cherokee came in, sold in the first quarter, compared with 9,648 a year ago.

-- The smaller, clunkier and even more angular Jeep Compass performed even more poorly, with 3,147 sold in the first quarter versus 10,400 in the same 2008 period.

-- Looking like an extra from a "Transformers" movie, the Jeep-based Dodge Nitro has lit very few fires. Exactly 5,218 have found buyers this year, as against 15,355 last year.

A special place in the Chrysler Hall of Shame should be reserved for the executive who green-lighted the Sebring sedan. Designed to compete against the Toyota Camry and the Honda Accord, the Sebring became a total flop in the midsize segment by trying to combine the virtues of a higher "command seating" position with traditional four door styling. The awkward design satisfied no one. Chrysler managed to sell 30,411 Sebrings in the first three months of last year but just 5, 636 this year.

Instead of 20% market share, Chrysler has notched just 11.2% of U.S. sales in 2009. And of course its profit margin is less than zero.

With that kind of product lineup, why would Fiat want to rush in to save the company? The redesigned Jeep Grand Cherokee looks promising, but its arrival in dealer showrooms is many months away. A new Chrysler 300C is on the way, too, but its day may have come and gone. Designs that really turn heads rarely have legs.

Fiat would be far better off bidding for Chrysler's viable pieces after the lights are turned off: the Jeep Grand Cherokee and Wrangler; Chrysler and Dodge minivans, and Dodge trucks.

After it buys the cars and trucks, it may want to acquire the valuable Saturn network from General Motors to have some dealers through which to sell them. And then Chrysler can join American Motors, Studebaker-Packard and all the other departed in the automotive graveyard.

If it's a case of a bailout that saves the our country's auto making industry & they go on & be sucessful again I think it's worth it.

Talks between the Treasury Department and lenders aimed at keeping Chrysler LLC out of bankruptcy broke down late Wednesday, making it all but certain that the car maker will file for Chapter 11 protection Thursday, according to people familiar with the discussions.

Administration officials, who have been braced for a Chrysler bankruptcy filing for weeks, say all the pieces are in place to get the country's third-largest employer through the court quickly, perhaps in a matter of weeks.

The talks with Chrysler's lenders broke down after the Obama administration's automotive task force worked into the evening to persuade several hedge funds and other lenders to accept a deal to reduce Chrysler's debt, said people involved in the talks.

The Treasury boosted its most recent offer to lenders on Wednesday by $250 million to $2.25 billion in cash for the banks and hedge funds to forgive $6.9 billion in Chrysler debt, people familiar with the matter said.

J.P. Morgan Chase & Co., which leads the creditor group as Chrysler's largest lender, gave the other 45 banks and hedge funds 90 minutes Wednesday evening to vote on the deal. A large number of the funds voted no and refused to budge, paving the way for an all but unavoidable trip to bankruptcy court, said people close to the talks.

Chrysler's likely trip to bankruptcy court is a watershed moment for an iconic American car maker that popularized the minivan, is the home of the Jeep and managed to rebound from an earlier financial crisis in the late 1970s. But Chrysler's fortunes have faded rapidly since its breakup with Daimler AG two years ago.

A trip through the courts will open a new chapter of uncertainty as the company's lenders and its thousands of affiliated dealers could mount a series of legal challenges to the administration's efforts to pull off a swift reorganization.

If the Obama administration's calculations are correct, the process should pave the way for Italian auto maker Fiat SpA to take over the American company.

Yeah the foreign auto companies were smarter but is it in our best interest not helping our country's auto makers because they messed up?

what state is Fiat based in?

Yeah guess this played out the way you wanted. ...

Yeah guess this played out the way you wanted. We'll see how that works out. Hope I'm wrong but I don't think it's a good thing.

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Not the way I wanted, the way I predicted. People are only buying so many cars. I predicted the bailout was a waste of money and it was. Propping up a badly run business has only 2 outcomes, more propping up or failure. Neither was palatable to me.

Actually the government is still doing bailout money along with the bankruptcy.

Well, that's SO much better, knowing that the taxpayers are throwing money at BANKRUPT company.

One lender, OppenheimerFunds Inc., said it rejected the government offer because it "unfairly asked our fund shareholders to make financial sacrifices greater than the sacrifices being made by unsecured creditors."

http://news.yahoo.com/s/ap/20090501/ap_on_bi_ge/us_chrysler


So, I know the Dem talking points is that they were greedy and wanted more federal bailout money; but that ain't so.

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The Offer

Obama’s team first offered secured lenders $2 billion for $6.9 billion in loans, then raised the offer to $2.25 billion. In a game of chicken, the holdouts asked for $2.5 billion yesterday, and Obama’s patience ran out. Many dissidents paid from 50 cents to 70 cents on the dollar for their Chrysler loans, so they’re sitting on losses, according to people familiar with the matter.

“They were hoping that everybody else would make sacrifices and they would have to make none,” Obama said. “Some demanded twice the return that other lenders were getting.”
...

New York-based OppenheimerFunds said it rejected the offers because the government “unfairly” asked the fund’s shareholders to make greater sacrifices than were being asked of unsecured creditors.

Entitled to Priority

“Our holdings in secured Chrysler debt are entitled to priority in long-established U.S. bankruptcy law, and we are obligated to our fund shareholders to support agreements that respect these laws,” the company said in an e-mail.

Chrysler’s dissident lenders have on their side the “absolute priority” bankruptcy rule, which holds that value must be distributed according to the legal priorities of the stakeholders. What riled the group that put out the statement today was the fact that junior creditors, consisting of a workers healthcare trust, would get equity in a new Chrysler entity while they would not.

In the deal Chrysler was trying to conclude out of court, Fiat would have become a 20 percent owner of Chrysler, and a union retiree health-care trust fund would hold 55 percent, with the rest of the company staying in the government’s hands initially, according to people familiar with the matter. The government intends to replicate this, using bankruptcy to set up a new company, people familiar with the plan said.

Junior Creditors

“Junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full,” the dissidents said in the statement.

So, in the end, the bailout actually hastened Chrysler's bankruptcy. Yeah, this was a brilliant plan all around wasn't it?