Republican Presidential hopeful Mitt Romney told voters in Ohio that he deserves “a lot of credit” for the auto industry turnaround since the bailout era.
Vice-President Joe Biden has been talking about the auto bailout frequently as the campaign for his re-election heats up in the coming months. A speech to NYU had him tout the record of the Obama administration, while also criticizing Gov. Mitt Romney’s famous “Let Detroit Go Bankrupt” op-ed.
Old habits die hard. Whether it’s GM’s desire to slice-and-dice its fuel economy achievements to make them look better than they are, or our instinct to correct the record, it’s all just a little bit of history repeating.
A year ago nearly to the day, I was investigating the connection between Libyan dictator Muammar Gaddafi and Fiat. With an American-led intervention in Libya underway, Reuters had reported that a Wikileaked State Department document revealed that the Libyan Government owned a two-percent stake in the automaker Fiat as recently as 2006. When I contacted Fiat’s international media relations department for comment, I received this response:
Dear Mr Niedermeyer,
Further to your email, I would mention that the Reuters report you refer to is incorrect. As too are other similar mentions that have appeared recently in the media concerning the LIA’s holdings in Fiat.
The LIA sold all of its 14% shareholding in Fiat SpA in 1986 – ten years after its initial stake was bought. It no longer has a stake in Fiat SpA.
I trust that this clarifies the matter.
It didn’t, actually. In fact the matter remained as clear as mud to me until just now, when I saw Reuters’ report that Italian police have seized $1.46 billion worth of Gaddafi assets, including “stakes in… carmaker Fiat,” under orders from the International Criminal Court.
After GM’s IPO, stockholders looked with great anxiety at the 32 percent the U.S. government still holds in General Motors. Allegedly, the U.S. government wanted to shed that share as quickly as possible, and someone dumping the stock does not make for rising stock prices. Now, GM is sending out smoke signals that a sale is far from imminent. GM’s chief spokesman Selim Bingol wrote in a blog that “the day will eventually come when the Treasury sells its GM stake. When is anybody’s guess (we have no say in the matter).” (Read More…)
Republican Presidential candidate Mitt Romney published an op-ed in the Detroit News calling the auto bailout “crony capitalism on a grand scale.” Boasting of his Michigan roots, Romney takes the Obama administration and the UAW to task for what he suggests is a symbiotic relationship between the two that allowed the union to get stakes in GM and Chrysler. In short, nothing new from the man who is running an election that is a referendum on Obama’s presidency.
Starting in March, the Chevrolet Volt will be eligible to use the HOV lane on California highways. The catch? You have to buy a new Volt to use the carpool lane.
Ford’s Australia branch is getting $34 million AUD (roughly $35 million U.S. dollars) plus an unspecified contribution from the government of Victoria (an Australian state), to sustain a Ford plant in Melbourne. Total investment is said to be roughly $105 million USD. Holden, GM’s Australian division, is looking for some government funds too, and its raising questions about the viability of Australia’s domestic car industry.
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Reasonable minds can disagree about the wisdom of the auto bailout, but according to analysis by the EPA and Department of Transportation (based on data from the Department of Energy and auto forecasters CSM), the Government’s rescue of GM and Chrysler may not have been the best idea (at least from a market perspective). According to data buried in the EPA/DOT proposed rule for 2017-2025 fuel economy standards [PDF here], Fiat-Chrysler is predicted to be the sick man of the auto industry by 2025, losing over half of its 2008 sales volume, while GM is expected to improve by only 3%, the second-worst projected performance (after Aston-Martin). In terms of percentages, even lowly Suzuki and Mitsubishi are projected to grow faster than The Mighty General. Ouch.
On the other hand, the proposed rule notes that data will be finalized before the final rule comes out. Besides, the agencies appropriately admit (in as many words) that projecting auto sales so far into the future is one hell of a crapshoot. Still, with the obvious exception of “Saab-Spyker” and with some skepticism about the projection’s optimism about overall market growth aside, these are not the craziest guesses I could imagine. Who knows what the future holds, but it certainly is a bit troubling that the government’s own data suggests the two automakers it bailed out may well have some of the weaker performances of the next 14 years. At least the Treasury could have sold off their remaining GM stock before this report was released…
One of the great mysteries to many inside the auto industry is why is GM’s stock price so low? Though the company had a weak third quarter, its stock price has been stuck well below its IPO price for much of the last year, despite a return to profitability. Though GM faces challenges, few inside the auto industry understand why its stock price remains so low. One theory: the government’s mere continued presence as a major stockholder creates uncertainty around the company. If this is the case, it creates something of a vicious cycle: the lower the stock price, the less likely the government is to sell its shares, leaving it lingering with no exit strategy, in turn driving the stock lower. Though that’s not likely to be the whole story, one thing is certain: the government has been forced to increase its loss estimate for the GM bailout. The Detroit News reports that the Treasury’s losses on GM are now estimated at $23.6b, up from $14.4b. And with an election looming, it seems likely that the White House will sell within the next six months. But will the government’s desire to protect itself politically trade off with GM’s PR? After all, whatever the Treasury’s final loss is, that number will be pinned to GM as a symbol of what it owes the American people. On the other hand, with most analysts insisting that GM stock is undervalued, another year of government ownership could convince investors to bid up the price, greatly reducing GM’s public debt. Too bad electoral politics will probably prevent that from happening….
Today’s Rasmussen poll results, which show that Americans are arguably less likely to buy from a bailed-out automaker, raise some interesting questions. Like, does receiving a bailout constitute an inviolable black mark on an automaker? Do the size of the bailout, and the amount the government recovers make a difference? With a presidential election looming, these factors are worth knowing: after all, the government still has the choice of when to divest its shares in GM. And with GM’s stock down over 40% from its $33 IPO price last November, the government is looking at a significantly larger loss than it would have endured had it divested immediately aftter the IPO. So, should the government dump now, anticipating larger losses in the near future, or should it hang on in hopes of a rebound, increasing the risk that “Government Motors” will become a political hot potato going into 2012? The latest clue, via CNBC, remains as cryptic as ever…
Whether or not the White House pressured or even contacted Ford Motor Company after the company released their recent ad appealing to anti-bailout sentiments we’ll probably never know. We’ll also probably never know if this was all just a symphony of leaks and disclaimers orchestrated by Ford. What we do know, thanks to a Rasmussen opinion poll [Sub. required, some data here], is that Ford had good reason to stoke American consumers’ resentment against it’s domestic competitors because they were bailed out by the government. The poll shows that the bailout is clearly a factor, sometimes an overriding one, in automobile purchase decisions. Not only did nearly one in five recent Ford buyers say that they or family members specifically chose Ford products because they didn’t take a government bailout, about half of all consumers surveyed said that they were more likely to buy Fords than GM or Chrysler products specifically because Ford didn’t get bailed out. [Note: Yes, Ford took Dept. of Energy loans and other government funds, but this survey was looking at people's opinions, not facts.]
The Detroit News reports that the only Republican in Washington with subpoena power, Rep Darrel Issa has written a letter asking Ford CEO Alan Mulally for “a full and complete explanation of Ford’s decision” to stop running an advertisement that was critical of the TARP-funded auto bailout.
In a letter, Issa asks Ford if any White House, Treasury or other federal employee discussed the ad with any Ford employee “at any time via any manner of communication” and asks the automaker to turn over any documents connected to any discussion by Oct. 12.
Spokeswoman Meghan Keck said Ford will cooperate, but reiterated that the White House didn’t pressure the Dearborn automaker.
Ford took the ad off of Youtube after “individuals inside the White House questioned whether the copy was publicly denigrating the controversial bailout policy CEO Alan Mulally repeatedly supported in the dark days of late 2008,” according to Daniel Howes of the Detroit News. The same day Ford restored the video, and denied that White House pressure led to the takedown. Color us curious as to how Mulally is going to explain this little episode…
UPDATE: The Washington Post’s Plum Line reports
I just got off the phone with Detroit News managing editor Don Nauss. “We stand by our column,” he told me. “It was based on multiple sources. It’s written by a busines columnist who can draw conclusions based on the reporting that they do.”
The story contains no attribution for the central charge of White House calls to Ford. Asked about this, Nauss declined to comment.
Asked to clarify if the column was alleging any White House pressure on Ford (the story hints at it up top but quotes someone later saying there was no pressure), Nauss declined to say. “The story speaks for itself,” he said.
When contacted about his column, Howes referred me to Nauss’s comments above.
As I noted in the comments of this morning’s piece on the Ford Bailout ad controversy, if the White House did contact Ford about the ad and the company did take down the video in response to the pressure, it certainly wouldn’t admit as much. After all, the whole point of caving to White House pressure would be to defuse, not inflame, a political standoff. And sure enough, one hour ago, Ford reposted the video (currently with around 300 views) and shared it on its Facebook account. Ford says the ad “ran as part of a planned rotation and continues to run online,” predictably avoiding any reference to reports of White House concern. And though the low view count proves that Ford took down, then reposted the video, a Youtube message to the uploader of what earlier today was the only remaining version on Youtube reveals that mainstream media news reporters were unable to find other copies of the ad.
The White House has not yet commented on the situation, but hit the jump for more details on Ford’s curious response…