Sunday, May 3, 2009
1) NYT 's Sanger and Vlasic, with what must be willed credulousness, describe how President Obama's "hard line" on Chrysler gives him and his "team" the "leverage" they will need going into the GM negotiations . Hard line? On Saturday, Micheline Maynard, also of the NYT , described how the United Auto Workers is slated to get a deal of unprecedented sweetness in the Chrysler bankruptcy. Despite all the press releases, the union didn't give up that much, apparently**--the word "lucrative" is even used:
Chrysler’s pension liability will shift from the defunct company to the new one, these people said, and workers will continue to have a lucrative contract.
Despite the concessions, Chrysler’s most senior workers, like those at Ford , still have healthy wages and benefits; bountiful health care coverage, at least until it is adjusted; and subsidies to help bolster unemployment benefits they receive while plants are closed, as they will be at Chrysler for weeks until the sale is final.
That carryover is unusual, [bankruptcy lawyer Mary Jo] Dowd said, since the buyers of assets in bankruptcy cases normally try to purchase them free and clear of their existing liabilities.
It also means the union will not have to come to terms with Fiat once it takes over the company, or risk having its contracts abrogated.
Does the Sunday New York Times read the Saturday New York Times ?
2) Sanger and Vlasic also give us a boastful, macho quote from Rahm Emanuel:
"G.M. is very different than Chrysler," Rahm Emanuel , Mr. Obama’s chief of staff, said Friday. "But I suppose the one lesson for G.M., and all the other players, is that this is a moment when a Democratic president said, 'I am really willing to let a company dissolve, and there’s not going to be an open checkbook.’ There’s got to be real viability."
Huh? How was Obama "willing to let [Chrysler] dissolve"? Seems like the opposite. And "real viability? Has Chrysler really achieved "viability"? This is at best an open question. Here are Chrysler's new sale figures . They're grim. Chrysler sold 1,320 Sebrings this month, for example--compared with almost 7,000 a year ago. The Sebring is is the mid-sized car that's supposed to compete with the Accord and Camry. How about the lower-end Jeep Compass? 712 sold. "These are the stats of a dead car company." Why the poor sales? Maybe this: Of fifteen manufacturers rated for 2009 on reliability and performance by Consumer Reports , Chrysler came in fifteenth. ("No Chrysler, Dodge, or Jeep vehicles are recommended.") And it's not like Chrysler has lots of appealing new models in the pipeline.
That appears to be the part left out of the Obama administration's self-aggrandizing deal spin: Who is going to buy the New Chrysler's cars? Consumers "in new markets around the world," say Sanger and Vlasic, with a straight face. Is Steve Rattner going to call and bully each and every one of them? At best Chrysler won't have new products to sell for 18 months , when in theory (and only in theory) Americans will be lining up to buy tiny FIATs.
If Chrysler fails in the marketplace again two or three years from now, after billions more in government subisidies, won't that reflect badly on Obama and his "economic team"? WIll it then appear to have been better to let Chrysler go into an actual, non-prearranged, non-jawboned bankruptcy, in which it would likely have been liquidated or in which the UAW would have had to make far more substantial concessions, like workers in other bankruptcies? The government could have assumed some of the U.A.W.s pension and health care liabilities (which it will probably end up doing, in part, in any case). But Chrysler's demise would have been a real cautionary example that gave the administration leverage in the GM negotiations (which may be what the U.A.W. was really scared of). Chrysler's rapid departure would also have opened up market share for GM--and for Ford, which is not wildly healthy itself.
Maybe Steve Rattner has saved Chrysler the way he saved Blender .
P.S.: It's one thing to politicize the reorganization of a prominent failed firm, leaning on private investors and making up new rules--if it works, are voters going to complain? It's another to engineer a slow-motion calamity.
Update : The Truth About Cars reacts somewhat more harshly to the same absurd Emanuel quote and tries to add up the GM and Chrysler subsidies so far ("just north of $37 billion" and "[t]hat doesn't include" ... well, a lot). ... Car and Driver runs down the uninspiring list of potential future FIAT/Chrysler products . The most promising alleged vehicle--the 200C EV --isn't due until 2012. ...
Backfill: Evan Newmark last week . He notices that "[o]n top of the $4.5 billion committed to Chrysler, the Fiat deal was originally supposed to require another $3 billion, but now the president is putting up $6 billion." ...
Psst: FIAT "doesn't actually have any money." ....
**-- Here's a WSJ news story on what the UAW seems to have actually given up: 1) Suspended cost-of-living adjustements; 2) Overtime only after 40 hours a week of work.[That wasn't the rule already?] 3) No Easter Monday holiday in 2010 and 2011." Some additional concessions in this AP report : 4) "The union also agreed to consolidate nonskilled labor job classifications into a team concept at all factories." [You mean unskilled workers were separated into different classifications before?] 5). Performance and Christmas bonuses suspended for two years. 6) In what seems like the only major cut, retirees will lose dental and vision benefits, at least temporarily. ... The 2015 contract will also go to binding arbitration if no deal is reached. I don't know if this is a "concession" or a protection. ... Most significantly, there is apparently no reduction in current UAW workers' high basic wage rate of near $30/hour . See also "Hourly Employees Spared Painful Cuts in Chrysler Bankruptcy" . 2:53 P.M.