“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."
The Obama administration's commitment of $30 billion on Monday to General Motors Corp. as it files for bankruptcy, brings the total amount of funds allocated and promised to the auto industry to $110 billion, including bailout capital and funds to be made available for green car component suppliers. Does that make sense?
Possibly.
When BMW built a new plant in South Carolina, 17 years ago , BMW promised 2,000 direct jobs and $500 million in capital investment. By early 2008, the company reported that it had 5,400 full-time jobs at the 1,150-acre site. More than $5 billion had been invested (in 2007 dollars), much more than originally promised. In March 2008, BMW announced it would invest $750 million more in South Carolina, taking production capacity to 240,000 units by 2012. The new investment will augment the plant size to 4 million square feet.
Chrysler has less than 30,000 UAW workers. GM has 70,000. A little math and we have 100,000 active members. Remember the $110 billion figure committed to the auto industry? That is ONE MILLION DOLLARS per job. BMW created 5400 jobs with $5 billion. That is one million dollars per job.
BMW produces 45 cars per job or $1.8 million in production per worker.
This will be choice. Obama is proposing that that senior secured lenders will be subordinated to union workers in ownership of the Chrysler company.
Eight US plants are to be closed and sold. These same plants are obviously in areas where the UAW workers live. The factories are at the epicenter of the major problem, which is unsustainable union demands, work rules and ethics.
The workers at these factories are being promised transfers to other Chrysler factories.
Questions
Who is going to buy these factories? To get the highest value, they would have to be used for what they were designed and that is automobiles or trucks. Anyone think that BWM or Toyota is going there?
The machinery equipment will be sold into a worldwide glut of used and obsolete depreciated capital equipment. There is more of that available than there are deserted sub prime houses. Most of it will be bought for scrap and end up being cut up to be used in China. They will not recover more than 5% of the original cost, most of which was spent on setup and installation.
Who is going to buy the cars?
While the bankruptcy case drags on will the Chrysler line up get better?
Will their service and parts be more available?
Will Team Obama allow the payment of retainage bonuses to demoralized but skilled people?
How about affirmative action on hiring and promotion, staffing and suppiers?
Here is what a modern car assembly plant looks like. Where are the workers? Are the UAW and government owners going to allow Chrysler to build a factory such as this?
The UAW workers and future shareholders point of view. They have some legitimate complaints, but how are you going to change this culture to a dynamic and profitable company? At what cost?
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May 2, 2009
Bankruptcy reality settles in at Chrysler
Automaker warns of likely trouble ahead
BY JUSTIN HYDE and GREG GARDNER FREE PRESS STAFF WRITERS
The promise of a surgical bankruptcy turned into a gritty reality for Chrysler LLC and its workers Friday, as the company outlined its immediate hurdles and workers dealt with plant closings and -- in some cases -- canceled pension checks.
The factory shutdown will push the critical launch of the 2011 Jeep Grand Cherokee back by up to six months. Replacement parts for repairs on some Chrysler vehicles could run low in the next 60 days. And Chrysler needs court approval to spend $753 million in the same period on incentives for dealers to sell its vehicles.
Lawyers submitted more than 150 separate filings in the first full day since the filing, underlining the complexity that will challenge all parties to complete the process in the desired 30-60 days.
Chrysler is to use $10.5 billion from the U.S. and Canadian governments to consummate a marriage with Fiat SpA, in which Fiat eventually will own 35% of Chrysler while a health care trust fund for UAW retirees owns 55% and the United States and Canada own the rest.
The first day of hearings in the bankruptcy court in New York moved quickly. More serious objections could arise Monday, when Chrysler begins legal moves to seal the Fiat deal.
To bolster its position, Chrysler outlined the lack of options in its bankruptcy case.
Vice Chairman Tom LaSorda said the company had held talks with several automakers -- including General Motors Corp., Toyota, Honda, Nissan and Volkswagen -- that failed to produce a partner.
In recent weeks, Chrysler held what amounted to a five-day bazaar for Chinese companies, offering to sell engines, transmissions and entire vehicle lines.
All of this, LaSorda said, shows that the Fiat deal is the only way out for Chrysler.
"With Fiat, Chrysler has a way forward," he said.
Plant closings
As part of its filing, Chrysler named eight U.S. plants that would be closed by 2010 and sold to settle debts of the old Chrysler.
Three of the plants are in metro Detroit -- Detroit Axle, Conner Avenue Assembly and Sterling Heights Assembly.
Chrysler said Friday that virtually all of the workers at the affected plans would be offered jobs at the new Chrysler.
Frank Ewasyshyn, Chrysler's executive vice president of manufacturing, outlined the delay in the Grand Cherokee and other dangers from the immediate hibernation of its factories.
The government has guaranteed Chrysler's warranties, but Ewasyshyn warns that Chrysler dealers could run short of parts such as oil filters, usually built by the company or its suppliers, within 28 days if payments aren't restored and some production restarted.
"So, four weeks from today, a customer who purchased a Chrysler 300 will pull into his local dealer to have a taillight repaired ... and will be unable to get the parts necessary," he said.
He added, "The longer the sale to Fiat is delayed, the more likely this devastating scenario will occur."
Surprise realizations
Dealers learned Friday that Chrysler Financial, which is independent of Chrysler, no longer would finance their inventories. That work has been turned over to GMAC, also an independent company, as part of the bankruptcy.
About 1,800 Chrysler retirees were shocked to discover that their benefit payments were voided Friday morning.
Lynn Feldhouse of Rochester Hills actually saw the deposit disappear as she checked her bank account online. "This can't be good," Feldhouse said. "I called the bank, and they told me there was nothing they could do because they got a message from Chrysler telling them to reverse the entry."
The problem affected people who have a supplemental pension, which is not insured by the Pension Benefit Guaranty Corp. Because that portion is backed only by Chrysler, it becomes part of Chrysler's asset base in the bankruptcy.
Chrysler is aware of the problem and is telling those affected that they will receive the PBGC-insured portion by May 18.
Contact JUSTIN HYDE: 202-906-8204 or jhyde@freepress.com. Free Press columnist Susan Tompor contributed to this report.
Additional Facts Chrysler's judge has dealt with big cases before The judge overseeing Chrysler's bankruptcy filing is no stranger to high-profile cases.
Arthur Gonzalez presided over the closely followed bankruptcy cases of energy company Enron and telecommunications giant WorldCom.
But the Chrysler case presents a new twist for the New York bankruptcy judge: the involvement of the federal government and President Barack Obama. The president describes the case as a "surgical bankruptcy" and hopes for a quick resolution of the case.
Who do you know that has the cash to buy a car company? Someone who needs instant brand recognition and an entry in the US auto market?
Daimler Chrysler Confirms Chrysler Talks
By MATT MOORE, AP Business Writer
BERLIN - DaimlerChrysler AG is confident a turnaround program at its Chrysler unit will return the beleaguered American brand to profitability, but Chairman Dieter Zetsche said Wednesday the automaker is in talks with unidentified potential buyers.
"As announced on Feb. 14, we are open to all options for future collaboration with Chrysler," he told some 9,000 shareholders crammed inside Berlin's exhibition center. "The statement is still true today."
He said that the talks have been with "potential partners who have shown a clear interest" and "so far, I am satisfied with the process. Everything is going according to plan."
He would not elaborate on who was involved in the talks.
Zetsche stunned the automotive world on Feb. 14 when he said that continued losses and fierce competition in the United States meant that the German-American automaker was considering all options for its Chrysler unit, and did not rule out a possible sale, saying only that all options were being considered.
He did not disclose whether any decision to sell Chrysler had been made or if the company was any closer to a solution. Still, he did say a recovery plan that will cut 13,000 jobs in the U.S. and Canada was moving forward.
The Chrysler unit lost $1.5 billion in 2006.
"The crucial factor was the unforeseeable shift in demand to smaller, more fuel-efficient vehicles which was triggered by increased gas prices in the U.S.," Zetsche said. He noted that Chrysler's strengths have been minivans, pickups and sport utility vehicles, autos not known for their fuel efficiency. Read the rest.
Poor 'ol Chrysler. Always a distant third except on the street or track. It was back in the early seventies that Lee Iacocca brought them back from near death. The era of American muscle cars was over and a long period of darkness was descending on Detroit. Chrysler was in financial trouble and its new CEO, with nowhere else to turn, had to go hat in hand to Congress and beg for the money to keep the company afloat. The problem then as now, was soaring fuel prices. The entire country debated whether it was appropriate for the Government to get involved in the largest bailout in US history but Mr. Iacocca convinced Congress to loan him the money necessary to return the company to the black. He paid off the loan early and then lead the nations efforts to refurbish the Statue of Liberty in time for the July 4, 1976 celebration. Mr. Iacocca made a lot of money for himself and became the iconic American success story.
I wish Chrysler well. It's unfortunate that the company is being traded around like this especially in light of the fact that they made the minivan ubiquitous.
