By on March 26, 2009

You’d kinda hope that the Presidential Task Force on Automobiles (PTFOA) would negotiate with Chrysler, GM, the United Auto Workers and GM’s bondholders down to the wire. After all, the actual deadline for the yes/no decision on the next round of bailout billions is March 31. So it kinda makes sense to hold their feet to the fire until the very last minute, forcing them to satisfy the conditions laid down by the first, $17.4b federal bailout. But nooooooo. Six days out from the deadline, the leaky ass quango known as the PTFOA has let slip the fact that they will, indeed, bless (a.k.a. “loan”) Chrysler and GM with $22B of your hard-earned tax dollars. Maybe more! But that’s OK, ’cause THIS TIME there will be strings! Timelines! Deadlines! The Wall Street Journal reports . . .

Interviews with task-force members indicate that the administration doesn’t want to let General Motors Corp. and Chrysler LLC slip into bankruptcy protection, a course advocated by some critics of the industry. Instead, the task force is expected to say that it sees viable futures for both GM and Chrysler, but only if there are sacrifices from their managements, unions and GM’s bondholders. The team will also lay out a firm timeline for action.

And now, the NSFW about how hard the PTFOA worked to get to the point where they’re happy to use federal money to [continue to] prop-up America’s zombie automakers.

In session after session in a warren of offices at the Treasury Department, the team has sat through tutorials on dealer financing, studied basic data and debated the future of U.S. car sales. They have spent days trying to understand the complexities of the hundreds of companies that supply the car companies with axles, seats and other parts.

Perhaps if they’d hired someone who already knew how the industry worked, they could have avoided those terrible all-nighters. As if that’s not enough of an insult to any industry worker’s intelligence, there’s more!

“It’s like a Rubik’s cube, trying to untwist it and trying to get all the colors to line up,” [Steven Rattner, a former journalist-turned-investment banker] said in an interview. “So we’ve learned a lot about how car dealers work, and how companies get paid when they sell a car to a dealer, and why there are a certain number of dealers more than are optimal. Have we learned everything? Of course not, but I think we are learning what we need to learn to do this job.”

So industry vets can work for forty years to gain enough knowledge to run a small business—successfully—in the automotive trade. But an investment banker and his boyz can get a handle on the entire industry in what, a month? Boy, they must be smart!

Mr. Rattner dismisses the idea that his team may not have enough auto expertise to tackle the job. “We are not trying to run car companies,” he says. He compares the work to what he and others have done in the private sector. “This is the type of investment decision that many of us on this team are used to making.”

Pride. Fall. Goeth. Rearrange. But don’t take my word for it. Here’s the WSJ’s report on the meeting between the PTFOA and Fiat, re: Fiat’s small car “alliance” with Chrysler.

Mr. Bloom focused on minute aspects of the business strategy, and Mr. Rattner, on how the deal would be structured. People on the Fiat team came away thinking that the task force’s questions betrayed a limited understanding of the industry. “It’s fair to say we walked out of the meeting and were a little unsettled,” says one member of the Fiat team.

If you’re thinking about forgiving the political appointees’ ignorance and laud them for, at least, standing apart and stepping back from the current meltdown, you know, to take the long term view, think again.

Several auto experts who’ve met with the panel say they’ve been struck by the group’s focus on trying to determine exactly when car sales will rebound. “They are absolutely concerned with the short-term, so it’s hard to see them grasping the medium or longer-term issues,” says Daniel Roos, an automotive expert at the Massachusetts Institute of Technology, who briefed the team in Washington on March 6.

I guess they’re listening to Deutsche Bank’s auto analyst, Rod Lache, who told the PTFOA to ignore the data. “This is a policy decision, not an economic one. One way or another, GM will have to be saved.” Of course they will! Because it’s all about jobs! jobs! jobs! Well, one job, anyway.

At the Chrysler Dodge truck assembly plant, located in nearby Warren, Mr. Rattner says, the importance of the task force’s work hit home. “At the end of all the numbers we are generating,” he says, “there are real people.”

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30 Comments on “Editorial: Bailout Watch 456: PTFOA to OK $22 Billion for Chrysler, GM...”


  • avatar
    jerry weber

    Bob, in your article there is one sentence that stands out as the core for failure of this US rescue. The Govt team says that many sacrificies have to be made. Which car company in 100 years has sacrificed themselves back to prosperity? In fact what car company has fallen back as far as Chrsyler & GM in 100 years and returned at all? I call this crisis much worse than the 1979 brush with death by chrysler. It was then that competition was much less and real product was in the chrysler pipeline. When GM says they are sacrificing the technical center and proving grounds staff, what will be in their future pipeline? We know already that GM has cancelled a light weight pickup diesel and delayed the convertable and Z28 camaro. When chrysler took federal loans in 79, they came out with the K car line and the minivans. There were no competitors to those products back then. They had a ten year run of profits to pay back loans and solidify their position in the markeplace. GM & chrysler have no such window of opportunity, and with chrysler having no new models and GM soon to be there, they are not even chrysler of 1979.

  • avatar
    tesla deathwatcher

    .

  • avatar

    I would love to have a picture of Obama negotiating a deal with nardelli and dumbshit using a 4-square to close em down on the variable points.

  • avatar
    superbadd75

    At this point I really wonder what the bailout is actually doing to fix any of this. I feel that if any of the Big 3 (Big whatever?) goes down, it’s taking a huge bite out of the economy. The automaker would take out thousands of dealerships, suppliers —which could in turn affect other automakers adversely—, warehouses, and a lot of other businesses that are in one way or another connected to the industry. At the same time, we can’t continue to heap billions upon billions GM and Chrysler, hoping that at some point they’ll turn around and be profitable again. Their biggest problems aren’t going to go away unless they are forced into bankruptcy, and as bad as that might be initially, it would ultimately yield better results. It seems they’re headed that way anyhow, so why not make them go CH11, and loan them the money as they need it to get through the bankruptcy while restructuring and getting out of the mess they’re in. After our money is gone, they’re still going to have dealers to pay off, too many factories, and legacy costs, amongst other obligations. Basically all I see is a vicious cycle and when the money stops flowing, what’s been done to ease the cycle?

  • avatar
    bluecon

    Now the Fed is buying the Treasuries from the Treasury. People won’t loan the US government money. So who is going to bailout the USA?

  • avatar
    ravenchris

    “kinda makes sense”… to whom?

  • avatar
    paris-dakar

    Mr. Bloom focused on minute aspects of the business strategy, and Mr. Rattner, on how the deal would be structured. People on the Fiat team came away thinking that the task force’s questions betrayed a limited understanding of the industry. “It’s fair to say we walked out of the meeting and were a little unsettled,” says one member of the Fiat team.

    Classic Facepalm moment. Oh to be a fly on that wall!

  • avatar
    no_slushbox

    This administration is showing the kind of cowardly appeasement in the face of a threat that hasn’t been seen since Neville Chamberlain.

    Gietner is the kind of life bureaucrat that has a huge inferiority complex about people that work in private industry, and therefore is easily bullied around and lied to by private industry leaders.

    At least Paulson only corrupt, he knew he was screwing over taxpayers, but he had to help his old friends at Goldman (they had previously made him CEO, so he had some debts). Gietner is worse than corrupt, he is a cowardly idiot who actually thinks the things he is being manipulated into doing are right.

  • avatar
    RetardedSparks

    Exactly the fiasco we all expected, though I must confess I didn’t expect a MSM expose on just how daft these people really are. I really love that FIAT called them out! Pot, kettle, black, etc.

    Washington will pump money into these companies for years, hoping that eventually auto sales will recover enough to make them “viable.”

  • avatar
    RetardedSparks

    no_slushbox:
    I don’t pin this on Geithner (maybe other stuff, but not this!)
    It was really the Prez who made “Thou shalt not cause loss of jobs” his one and only guiding principle of the recovery. Everyone else is just following in step. The PTFOA were basically instructed to solve the problam with no loss of jobs. Perpetual life support is the only solution they could come up with on short notice.
    And Bush/Paulson had no better ideas or inclinations, they were just able to make their escape. They would have done exactly the same thing.

  • avatar
    AWD-03

    “I have a dream, that one day companies of any size will have to stand on their own two feet. I have a dream that one day the US can return to its source of prosperity, Capitalism! I have a dream that Democrat and Republican will one day sit side by side and remember back when those parties were ever in office.”

    Seriously, neither side can get this right, because they are all politicians first.

    Bantruptcy in this case is too hard for a politician to handle. We need true business leaders in this, taking charge of the long term.

    I really wish my money wasn’t being used to fund these bankrupt companies or the bankrupt politicians who won’t let them die.

  • avatar
    no_slushbox

    RetardedSparks:

    On top of robbing the taxpayers to pay off extortionists in the financial industry, Tim Geithner is also the co-chair of the Presidential Task Force on the Auto Industry, and as the Treasury Secretary he is responsible for illegally diverting TARP money to the PTFOA (I seriously doubt that the administration has the courage to ask Congress for this $22 billion). “Just following orders” is not a good excuse.

    If someone as high profile as the Treasury Secretary resigned in disgust over the redistribution of trillions in taxpayer wealth to large banks and the failed auto industry the mainstream media would no longer be able to gloss over what is going on.

    Unfortunately Geithner does not have the courage to do that, or worse, doesn’t think anything is going wrong. “Of course we need to give all the taxpayer money to big banks and the auto industry, they’re the only ones smart enough to spend it in a crisis like this.”

    Paulson is a corrupt, dishonest person, as I mentioned above, but that ranks above gullible idiot with me.

    Bush originally pushed through TARP with Iraq war-style threats, and originally illegally diverted TARP funds the auto industry. That should never be forgotten, but Bush is no longer in power, so he doesn’t really matter to me anymore.

  • avatar
    RetardedSparks

    no_slushbox:

    All I’m saying is that these policy decisions go way beyond Geithner.

    And comparing the auto bailout to the Holocaust is more than a little extreme… not to mention offensive.

  • avatar
    psarhjinian

    I would love to have a picture of Obama negotiating a deal with nardelli and dumbshit using 4-square to close em down on the variable points.

    That had me smiling. Good one.

  • avatar
    psarhjinian

    This administration is showing the kind of cowardly appeasement in the face of a threat that hasn’t been seen since Neville Chamberlain.

    That’s very true, except for this “since Neville Chamberlain” part. Government has traditionally been either cowardly (because taking responsibility is bad), duplicitous (because the lie is easier than the truth), or both. This has been going on for a very long time, and will continue to be a problem as long as government remains more accountable to itself and small slices of the population that support it, than to the electorate as a whole**.

    This is probably the former: no one wants to make the big decision, because no one wants the blame to stick with them if any aspect goes wrong: either nationalize and take direct control, or let them fail. I’m in favour of the former because I don’t think this is a good time for the economy to lose a major employer (and because I’m a pinko), most posters here prefer or the latter for their own reasons.

    This is the worst of both options: financial backing, but without any control, stake or direction.

    ** How to fix it? Damn me, if I know. Smarter people than me have been working on the problem for decades.

  • avatar
    psarhjinian

    Bantruptcy in this case is too hard for a politician to handle. We need true business leaders in this, taking charge of the long term.

    Business leaders ran the boat straight into the iceberg in the first place. I don’t think they’re necessarily the solution.

    What we need are people of any stripe (business, government, academia, military; doesn’t matter) willing to make hard choices and accept the responsibility for doing so, not fate-by-committee bargaining.

  • avatar
    no_slushbox

    RetardedSparks:

    I’m comparing the administration to Chamberlain, not the Reich. There is no “way beyond” Geithner. He is THE person in charge of the Treasury, which is administering all of the auto bailouts, and spliting the financial bailouts with the Fed.

    There is only one person above Geithner, nobody is “way above” him; he could resign and tell the media why he had to.

    But then he couldn’t be a life bureaucrat.

    Chamberlain is the best example of cowardly, gullible appeasement in recent history, but perhaps it is cliche, so here is another example.

    The auto industry and large financial institutions are Lord Humongous. Geithner is one of the cowardly settlers who says that Lord Humongous sounds like a reasonable guy.

    Here is the Lord Humongous speech, I couldn’t find a clip of the settlers’ cowardly responses, but a clip of Geithner speaking would fit perfectly:

    psarhjinian:

    “That’s very true, except for this ‘since Neville Chamberlain’ part.”

    You are correct, this kind of cowardly appeasement has been seen as recently as Bush’s initial handling of the financial downturn (Paulson was corrupt, but on this issue I think Bush was mostly scared and lazy), and as recently as the Democrats’ support of the invasion of Iraq.

  • avatar
    AWD-03

    psarhjinian You miss my point. A true business leader is a person with vision for the long term as I mentioned. The people responsible for these debacles are short term profit hungry Capitalists of the worst type.

    I want some of that old time Capitalism where a person came in and started up a company with an eye towards the future and an eye on the present. Make profits now and later. Not a hard concept and one that GM became disconnected with sometime in the 60’s and demonstrated to the customer directly in the 80’s.

  • avatar
    McDoughnut

    Are any of us really surprised by this announcement? Come on, really….

  • avatar
    Ralph SS

    Before reading the article I was thinking that all the PTFOA are trying to do is to keep ’em (GM/Chrysler) afloat until the economy shows signs of recovery. Then if one or both fail it won’t be as critical (theoretically).

    For after reading the article, just copy and paste the above.

  • avatar
    BDB

    “Before reading the article I was thinking that all the PTFOA are trying to do is to keep ‘em (GM/Chrysler) afloat until the economy shows signs of recovery. Then if one or both fail it won’t be as critical (theoretically).”

    That makes a lot of sense, good point.

  • avatar
    jkross22

    @RetartedSparks:

    This is Geithner’s fault. It was his decision as the Treasury Secretary, was it not?

    This bullshit lack of accountability is how we got into this mess. By pretending that it wasn’t any one person that decided this is complete garbage. Bush and Paulson sucked, too, and history will hold their feet to the fire, but as no_slush said, they’re not in power anymore.

    President HopenChange pushed through a tax cheat to head the treasury. Maybe we should have reset our expectations.

  • avatar
    TonyJZX

    so does this mean that Fiat are out and they are getting the money anyway?

  • avatar

    Taxpayer dollars, meet toilet……

    now, flush……

    Wooosh !

  • avatar
    akear

    Obama will be doing this for 8 years so get used to it. The Republicans have screwed up so bad we won’t be seeing them in power for years. Too bad the real villains can’t be punished. I am talking about Way-goner, Putz, Mulally, and Nardelli.

    Nice job this year Nardelli. Chrysler is the only manufacturer without one car on Consumer Reports recommended list.

  • avatar
    mel23

    Comparisons to Chamberlain aren’t too far off. England had no serious military power at that time, so buying some time was really all they could do. What’s left of our economy could not stand the crash of the auto industry, but this does not mean we couldn’t stand to see Wagoner’s ass bouncing across Pennsylvania avenue after being booted out. I wonder where all this bailout money will lead us if sales stay down. Will people just report to work and play cards til quitting time, or will the make stuff? If they make stuff that doesn’t sell, shouldn’t we see some beyond huge incentives pretty soon?

  • avatar
    Geotpf

    Ralph SS has a point. Lending GM and Chrysler enough money to stay afloat until 2011 or so might be a good idea (at least politically), just so several hundred thousand more people don’t lose their jobs in an already piss poor economy.

  • avatar

    Geotpf

    What about the transplant workers who could lose their jobs in a piss poor economy because our tax money is propping-up Chrysler and GM?

    And, again, what’s the cost of keeping the mothership running vs. letting them go C11 and providing a safety net?

  • avatar
    fincar1

    I think that giving Chrysler and GM taxpayer money is helping foreign automakers more than it helps Chrysler and GM.

    Chrysler and GM can’t sell cars because they are overpriced; they want more money for them than they are worth. By subsiding these companies the government is propping up these prices, allowing the foreign manufacturers to set their prices higher than they otherwise might. Thus the subsidy confers no advantage on GM and Chrysler in terms of increased sales, and foreign manufacturers make more profit.

  • avatar
    agenthex

    I know this is an enthusiast site and therefore its members care to some degree about the general auto biz, however it’s also helpful to see the issue from the policy/econ side.

    The gov is currently trying to prop up employment and spend as much as politically feasible to avoid a deflationary spiral, the result of which is a collapse of the capital system. Given the number of jobs in the industry, it may not be poor spending if it’s keeping a substantive number of people employed.

    So, yes it’s misleading to call this the task force on autos, when it’s more of an econ task force that just happen to be looking at the major businesses making auto.

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