Bush won’t take the fall for Detroit’s fall

The NYT reports:

President Bush announced $13.4 billion in emergency loans on Friday to prevent the collapse of General Motors and Chrysler, and said another $4 billion would be available for the hobbled automakers in February. The entire bailout is conditioned on the companies undertaking sweeping reorganizations to show that they can return to profitability….

The decision to use the stabilization fund was also a major turnabout for Mr. Bush, who for weeks had insisted that the Treasury program should not be used to help the automakers.

In the end, it was clear that Mr. Bush did not want G.M. or Chrysler, both American icons, to go down on his watch.

I guess losing New Orleans, America’s good name, our civil liberties, the credibility of the constitution and of the Justice Department (and the SEC and every other watchdog agency), the health care of millions of people, rising wages for most Americans, the housing industry, the financial sector, the economy in general, the climate for the next thousand years, [insert your W-driven calamity here], was enough for the President. I know it was enough for the rest of us.

Bush has punted this problem, and all the others, to Obama:

“These are not ordinary circumstances,” Mr. Bush said in televised remarks that quickly touched off a debate over the fairness of his plan. “In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action.”

Mr. Bush made his announcement a week after Senate Republicans blocked an automaker bailout that had been negotiated by the White House and Congressional Democrats. The loan package announced by the president includes requirements that are roughly identical to those in that bill, which was approved by the House.

But House Speaker Nancy Pelosi said the White House package “unfortunately singles out workers and clearly puts them at a disadvantage before negotiations have even begun.” Other reaction cut across political lines, with some Republicans criticizing the White House, while other Republicans from states dependent on the auto industry offered praise….

A close reading of the package announced by Mr. Bush shows that it is different from the legislation adopted by the House in a crucial way: it strips away a requirement that Cerebrus Capital Management, the private equity firm that owns 80 percent of Chrysler, be held liable for any losses experienced by the taxpayers. Lawmakers in both parties have expressed outrage that Cerebrus, which is profitable, had refused to put up any more cash to aid Chrysler .

The bill adopted by the House would have allowed the government to reach up through Chrysler’s complicated corporate structure and take an equity stake in Cerberus itself, essentially requiring Cerberus to make the taxpayers whole should the government incur losses.

The fund agreed on Friday to put another $2 billion into Chrysler. Administration officials said the investment effectively put Cerberus on the hook for far more than just the government loans, and that taxpayers were being protected through the tough restrictions imposed in the loan agreements — including provisions that would give the government an equity stake in G.M. and Chrysler.

“They carry all of the risk,” Tony Fratto, the deputy White House press secretary, said of Cerberus. “We are limiting risk and expect to be paid back.”

The loan deal requires the companies to quickly reduce their debt by two-thirds, mostly through debt-for-equity swaps, and to reach an agreement with the United Automobile Workers union to cut wages and benefits so they are competitive with those of employees of foreign-based automakers in the United States.

The union president, Ron Gettelfinger, said, he was disappointed that Mr. Bush added conditions singling out workers.

“We will work with the Obama administration and the new Congress to ensure that these unfair conditions are removed,” Mr. Gettelfinger said.At a news conference in Detroit, the chief executive of G.M., Rick Wagoner, said, “We’ve got a huge amount of work to do over the next 90 days and beyond, so our focus is on executing our G.M. plan.”

“We obviously have to deliver on our plan, but we’d like to get more focus back on what we think is a very competitive set of cars and trucks that are competitive in fuel economy and quality and in most cases have better designs,” Mr. Wagoner said.

In a statement to employees, Robert L. Nardelli, the chief executive of Chrysler, said the company would hold up its end of the bargain.

“The receipt of this loan means Chrysler can continue to pursue its vision to build the fuel-efficient, high-quality cars and trucks people want to buy, will enjoy driving and will want to buy again,” Mr. Nardelli said….

To gain access to the loans, G.M. and Chrysler must agree to concessions, including limits on executive pay and the elimination of private corporate jets.

Yet Mr. Bush essentially handed off to President-elect Barack Obama what will become one of the first, most difficult calls of his presidency: a political and economic judgment about whether G.M. and Chrysler are financially viable. (Ford is not seeking immediate government help.)

If, by March 31, Chrysler and G.M. cannot meet that standard — and clearly they could not meet it today — the $13.5 billion in loans would be “called” for immediate repayment, with the government placed ahead of all other creditors.

In effect, the White House has required the auto companies to cut the equivalent of $13.5 billion in costs within three months, in order to repay the federal money and receive another infusion of capital that will either keep them operating for the rest of the year outside of bankruptcy protection or provide financing while they reorganize in bankruptcy.

That is an enormous amount of savings to find in such a short period, industry analysts said, especially given the bleak conditions under which the companies are operating. Auto sales are the worst since the early 1980s, and there has been no sign that banks or the car companies’ financing arms will loosen tight restrictions on loans.

To avoid bankruptcy, the companies will need to complete negotiations with unions, creditors, suppliers and dealers by March 31. Any judgment on the accords they reach with those groups will inevitably be both economic and political….

Mr. Bush chided Congress for failing to approve the auto rescue legislation, but he did not note that his fellow Republicans in the Senate were responsible for scuttling the bill in what amounted to a sharp rebuke to the White House in the waning days of his administration.

Is there anybody left in the entire country who thinks the president has done a good job?

Related Posts:

17 Responses to Bush won’t take the fall for Detroit’s fall

  1. Bob Wallace says:

    Actually, about 18% think he’s done just fine.

    Which might lead us to a new intelligence test and a much higher estimation of idiocy….


    Personally, I’m damned glad Bush punted.

    It’s not going to cost any ‘real’ money. Just a few Iraq expenditure days or only a bit more than we spend each year on bottled water.

    You didn’t really want Bush to try to fix things, did you?

  2. hapa says:

    of course bush punted. this whole thing has been a laughable pre-obama shadow play. without having torn up the CDS bets against GM et al, the finance sector would be clobbered by a big three bankruptcy. IT WAS NEVER GOING TO HAPPEN. much the same way it was “safe” for repubs to vote against TARP 1.0.

    i can’t quite believe how gullible people are being about this.

  3. Eli Rabett says:

    I think Bush is beginning to sense how hated he is. Hoover basically could not go out in public for 20-25 years. Bush?

  4. Kathy N. says:

    He can’t really believe the majority of us are buying his IMAGE SHINE. If it wasn’t so tragic for all of us it would be laughable. At least now that we have elected Obama the world is only laughing at him. I think he’ll need to lay very low for a long time. Here’s hopeing its forever.

  5. Rick says:

    So Dubya is the devil himself and fully and personally responsible for every economic and environmental woe and for any international strain that may exist?

    Thats what I’m seeing in this post and in the comment section.

    it’s a little over the top guys – Bush never was a dictator with unlimited power. You’ve got a boatload of pols from both sides of the aisle and all levels of government that deserve blame.

    Throwing darts (or shoes) at Bush is a little too easy.

  6. stone1343 says:

    In your list of W-driven calamities, you forgot science and the EPA…

  7. Eli Rabett says:

    In what way are the US President’s powers limited except for the term of office?

  8. jcwinnie says:

    Yeah, and is it also tripwire politics?

  9. Bob Wallace says:

    “In what way are the US President’s powers limited except for the term of office?”

    This is something that I hope the next Congress will revisit.

    One easy thing they could do is to take back the ability to declare war. The Constitution gives Congress that power. They could reclaim it.

    Something that I hope they discuss is a Constitutional limit to the president’s pardoning powers. A president should not be able to use the power of pardons to allow himself or members of hie administration to disregard laws.

    As it is now written in the Constitution it appears that a president could murder his wife and grant himself a pardon. At least, he could hire someone to kill his wife and then pardon the hit man.

    Then there are the “signing statements”. Where do they occur in the Constitution or Amendments? If they aren’t supported by the Constitution it would take only a super majority to ram through a law that did away with them. And with Obama in office it might take only a simple majority.

  10. Hal Levin says:

    Cerberus = otherwise known as Dan Quayle and John Snow and a bunch of other wired Republicans — is profitable but wouldn’t help Chrysler. While doing his best to trash the environment, Bush is also helping his buddies and his father’s VP.

  11. Bob Wallace says:

    Hal – you sure about that?

    I read something in the last couple of days (can’t remember where) about Cerberus being legally prevented from putting more money into Chrysler, or even loaning them money.

    As I recall it had to do with investment contracts that they had with retirement funds, etc. who were invested in Cerberus.

  12. Karen says:

    I’d like to hear more from Hapa. I’m not aware of the CDS situation with respect to the big three. Can you spell it out for us in more detail?

  13. Rick: Absolutely. It was GWB who would not allow us bureaucrats to do our jobs. If we had been allowed to enforce the laws on the books, this depression would not have happened. GWB contracted out the government to the contractors.
    2 of my colleagues committed suicide and I retired about half way thruough the Bush regime. That should tell you something.

  14. Make them make durable cars.

    Did anybody notice how Diamler-Benz bought out Chrysler so they could ruin the Dodge Diesel? At 165 to 185 horsepower, that engine was medium duty, meaning it would go about 400,000 miles. Dr. Z offered it in a choice of horsepowers, knowing that the average consumer is stupid enough to think that more horsepower means heavier duty. The end result is that Dodge makes that engine put out 325 horsepower, making it LIGHT duty, meaning that it will be worn out in only 100,000 miles. It won’t do you any good to try to get less horsepower out of it by staying off the gas pedal. When the peak horsepower goes up, so does the idle horsepower. Now that the Dodge diesel is ruined, Diamler-Benz sold Chrysler. There is a Mack truck near here with 1.7 Million miles on without an overhaul. Mack doesn’t make them that way any more because the drivers wanted more “efficiency.” There is no possible way to make a heavy duty engine out of a medium duty engine. If you want a car that will go a million miles, buy an SAE Class 8 truck, like the tractor part of an 18 wheeler. To get insurance, you will have to put a camper on it so you can register it as a motorhome. There is no engineering reason why cars can’t go a million miles between overhauls. It is purely that management won’t allow it. It shouldn’t cost more than 10% to 15% to make cars last 400,000 miles instead of 100,000 miles. All you have to do is let the engineers follow the SEA Class 6 reliability standards. Cars are SEA Class 1 dependable and pickup “trucks” are SAE Class 1b dependable. There is 4 times too much capacity to build cars and pickups.

  15. hapa says:

    karen: it’s a mess. this is the story i got on it. here is a more recent marketwatch story about it.

    i told somebody a couple weeks ago, there are two things that now look stupid as dirt: unbacked bets against bankruptcy and state-level zero-tolerance budget balancing requirements. both practices were taken up on the assumption that Nothing Could Ever Go Wrong. now they are time bombs.

  16. Hello, i’ve been browsing around your site and it looks really really neat. I’m building an automotive home page and struggling to make it look good, everytime I touch something I mess it up. How hard was it to build your site? Could someone like me with no experience do it, and add update pages without wrecking it every time?

  17. John Walker says:

    This is a great site, I’d be interested in trading links if you would be. I have a similar blog in this niche.