Auto Talks Collapse in Senate

Posted on December 11, 2008 by billmanzi

Negotiations in the United States Senate over the bill to provide government assistance to U.S. automakers collapsed tonight, a victim of disagreement over wage concessions by the U.A.W. The Republicans in the Senate appear prepared to roll the dice on a bankruptcy filing by G.M., and the U.A.W. appears willing to let that happen to avoid bowing to Republican wage demands. Essentially it appears that the Republican negotiating position demands immediate wage rollbacks by the U.A.W. to levels earned by non union factories operating in the U.S. It is an amazing thing to me that both sides appear willing to take this chance. We will likely soon find out if the theory that bankruptcy could be helpful to G.M. is right or wrong. A strong management team at G.M. will be needed to guide the company through bankruptcy. It is not the team in place today. The G.M. Board should exercise its fiduciary responsibilty here and fire top management immediately if bankruptcy is the route. The Board should also be put on notice that failure to properly discharge its responsibilities will have legal repurcussions that could extend to personal financial and other jeopardy. Proper criticism has accrued to the arrogant incompetence of management, but the Board, with the duty to oversee management, has failed miserably and collected fat fees while allowing this catastrophe to unfold. They should be held accountable.

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The Obama Press Conference

Posted on December 11, 2008 by billmanzi

New HHS Secretary Tom Daschle is introduced, and President elect Obama takes questions on the scandal involving the Governor of Illinois.

http://www.msnbc.msn.com/id/22425001/vp/28177589#28177589

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The Real Numbers in Auto Wages

Posted on December 11, 2008 by billmanzi

Yesterday’s New York Times had an interesting analysis of auto wages, and the disparity between the U.A.W. organized plants and the non union manufacturers. The Times story refers to the $73 an hour wage rate often cited by those folks highly critical of the U.A.W. and Detroit. That number however includes the overall pension costs of the automakers, which they divide by the hours worked in their plants to arrive at a figure of about $15 per hour, which has been added to the wage and benefit package of an autoworker to arrive at the higher number. From the New York Times:

The first category is simply cash payments, which is what many people imagine when they hear the word “compensation.” It includes wages, overtime and vacation pay, and comes to about $40 an hour. (The numbers vary a bit by company and year. That’s why $73 is sometimes $70 or $77.)

The second category is fringe benefits, like health insurance and pensions. These benefits have real value, even if they don’t show up on a weekly paycheck. At the Big Three, the benefits amount to $15 an hour or so.

Add the two together, and you get the true hourly compensation of Detroit’s unionized work force: roughly $55 an hour. It’s a little more than twice as much as the typical American worker makes, benefits included. The more relevant comparison, though, is probably to Honda’s or Toyota’s (nonunionized) workers. They make in the neighborhood of $45 an hour, and most of the gap stems from their less generous benefits.

The third category is the cost of benefits for retirees. These are essentially fixed costs that have no relation to how many vehicles the companies make. But they are a real cost, so the companies add them into the mix — dividing those costs by the total hours of the current work force, to get a figure of $15 or so — and end up at roughly $70 an hour.

So the Times story shows that in terms of wages the active U.A.W. worker does indeed make more money than a similar non union worker at Honda or Toyota, the spread is not what people have made it out to be. The story is worth a look, and does go beyond the wage differential to insist that the real problem lies in Detroit’s manufacturing of sub-standard cars that Americans do not want to buy.

I would add to that the observation that at least in the short to middle term the automakers are saddled with a business model that requires them to sell a volume of cars that is not achievable. The same dynamic applies to the foreign manufacturers, who have also seen sales plummet. American society, with the wringing out of our credit markets, will have substantially less buying power than in years gone by. And that is at least in part because we have lived beyond our means as a country. With reduced buying capacity for this country many business models, not just autos, will begin to fail, a victim of assumptions about sales that are just not going to hold up. A correction without pain is highly desirable, but not likely.

Read the Times story here.

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House Passes Auto Bailout

Posted on December 10, 2008 by billmanzi

The U.S. House tonight passed an auto bailout package of $14 billion dollars for the Big Three by a comfortable margin. From the Washington Post:

The House tonight, 237-170, approved an emergency plan to prevent the collapse of the nation’s domestic automobile industry, but the measure faced serious obstacles in the Senate, where Republicans were revolting against a White House-brokered deal to speed $14 billion to cash-starved General Motors and Chrysler.

On to the Senate, where Republican opposition is hardening. President Bush is expected to lobby recalcitrant members personally. Look for passage this week.

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The Return of Carol Browner

Posted on December 10, 2008 by billmanzi

NBC is reporting that former EPA head Carol Browner will be named energy “czar” by President-elect Barack Obama. Obama will also name Steven Chu as Energy Secretary, and Lisa Jackson will become the administrator of the EPA. Browner is a well known figure who did an outstanding job as EPA administrator during the Clinton years. The Browner position is new, and with the focus on energy given by Obama it should be a powerful slot.

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Senate Republicans look to block auto bailout

Posted on December 10, 2008 by billmanzi

Senate Republicans, left on the sideline as the Bush White House negotiated the terms of a bailout of the Big Three with House Democrats, are threatening to block passage of the bill, which could be considered as early as tommorow. From MSNBC:

Senate Republicans say they have grave concerns about the agreement between congressional Democrats and the Bush White House to speed billions of dollars to struggling U.S. automakers.

Sen. George V. Voinovich, a Republican from Ohio and a leading supporter of the emergency measure, says it doesn’t have the necessary Republican votes to pass Congress.

The legislation will create an auto czar who will have some authority to force bankruptcy if sufficient progress is not made by the auto companies to achieve cost reductions and become viable entities.

Under the bill the Big Three would have to negotiate with labor unions, creditors and others and submit blueprints on March 31 to the industry czar showing how they would restructure to ensure their survival, although they could be given until the end of May to negotiate with the government on a final agreement.

Further conditions are added, and some substantive power given to the auto czar.

The car czar would have say-so over any major business decisions by the automakers while they were taking advantage of federal aid, with veto power over any transaction of $100 million or more. The companies — including the private equity firm Cerberus, which owns a majority stake in Chrysler — would have to open their books to the government overseer.

And if Chrysler defaulted on its loan, Cerberus would be responsible for reimbursing the government.

The measure would attach an array of conditions to the bailout money, including some of the same restrictions imposed on banks as part of the $700 billion Wall Street rescue. Among them are limits on executive compensation, a prohibition on paying dividends and requirements that the government share in future profits and taxpayers be repaid before any other shareholders.

One Republican called that approach “ass-backwards”.

Vitter said the package has an “ass-backwards” approach to curing what ails the U.S. auto industry— giving carmakers money immediately, and only later demanding that they restructure.

A key sticking point in the negotiations between the White House and House Democrats was a provision in the bill that would have forced automakers to drop lawsuits challenging individual state laws that mandated emission standards over and above existing federal clean air requirements. The Democrats, to the chagrin of the environmental folks, caved in on that issue and removed that provision.

President elect Obama came out in support of the bailout, calling for “stabilization of the patient.”

“As messy as it may be, I think there’s a sense of, ’Let’s stabilize the patient,’ “ he said in an interview published in Wednesday’s editions of the Chicago Tribune and Los Angeles Times.

He called the auto industry’s plight — lackluster sales, choked credit and widespread economic turmoil — “the perfect storm.”

I have attached a pdf containing the full text of the agreement for those folks crazy enough to want to read it. I predict passage, with Senate Republicans making enough noise to mollify the base, and then rolling over to make passage possible.

auto_bailout_bill

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Jesse Jackson Jr. Live

Posted on December 10, 2008 by billmanzi

http://www.washingtonpost.com/wp-srv/mmedia/player/wpniplayer_viral.swf?thisObj=fo937913&vid=121008-9v_title

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Baddour Advocates Cutting Toll Hikes, Massport Resists Plan

Posted on December 10, 2008 by billmanzi

State Senator Steve Baddour, conducting a series of legislative transportation hearings, is calling for a reduction in the toll increases advocated by the Governor at the Mass Pike. The toll increases would raise $100 million dollars, a figure Baddour believes can be cut roughly in half. From the Boston Herald:

Baddour said a roughly $55 million dollar toll increase would be sufficient instead of the current $100 million hike, and the charge at the Allston and Weston booths and in the tunnels would be far less than the $2 and $7 currently proposed.

The Pike Director warned against such an approach, citing the possibility of bonding downgrades tripping the swaption penalties that could result in hundreds of millions of dollars of additional liability to the Pike.

Pike Executive Director Alan LeBovidge said a smaller increase might make Big Dig investors nervous and trigger a $423 million termination payment to UBS, one of the many lenders.

Baddour continued his joust with the Governor over the Administration’s delay in getting out a comprehensive transportation plan.

“If we don’t get this done by January or February, we might as well scrap it today,” Baddour said of Patrick’s comprehensive transportation plan. “Are we just spinning our wheels here?”

Massport also threw some cold water on the Governor’s plan to drop the Bid Dig debt onto them, with the head man calling for a comprehensive plan to be filed before any toll hikes take place. (Do I see the invisible hand of Senator Baddour here?) From the Herald:

Massport boss Tom Kinton told lawmakers yesterday he wants to hold off on a toll hike for Tobin Bridge drivers until the Legislature approves comprehensive transportation reforms.

Kinton also cast doubt on whether his agency has the financial muscle to take on the Pike’s debt just weeks before Gov. Deval Patrick is expected to officially file his transportation plan.

“If we don’t get it right, we’ll just have another Turnpike Authority sitting before this board in a year or two,” Kinton told lawmakers at a hearing yesterday to review Patrick’s plan to fold part of the Massachusetts Turnpike Authority into Massport. “It’s complicated and it’s risky.”

The Governor’s transportation “plan” seems to be in a little bit of trouble even before it is filed. And that was duly noted by House Chair Joseph Wagoner:

“Your remarks sound like less than a ringing endorsement of the administration’s plan,” Rep. Joseph Wagner (D-Chicopee), co-chairman of the legislative transportation committee, told Kinton.

The Governor has a tough road in front of him on transportation that seems to be getting tougher by the day. And no matter what the specific outcome there will be some constituency blaming him for the result. He will need a bold stroke to undo some of the damage being done to him by this process.

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Al Gore Pays a visit

Posted on December 9, 2008 by billmanzi

Al Gore visited with President elect Obama today, and was promptly swept up in the media frenzy over the arrest of the Governor of Illinois. In this clip President elect Obama comments on the Illinois situation, and takes one question at the end. In between he talks about the Gore visit.

http://www.msnbc.msn.com/id/22425001/vp/28144041#28144041

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Wilkerson, Turner indicted on conspiracy

Posted on December 9, 2008 by billmanzi

Former State Senator Diane Wilkerson and Boston City Councilor Chuck Turner were today indicted by a federal grand jury on conspiracy charges relating to the issuance of a liquor license in Boston. From the Boston Globe:

City Councilor Chuck Turner and former state Senator Dianne Wilkerson were charged for the first time today with conspiracy, adding another allegation to an ongoing federal bribery sting that has upended City Hall and Beacon Hill.

A federal grand jury issued an indictment alleging that Turner and Wilkerson worked together to extort money from a businessman seeking a liquor license for a nightclub in their district. The 17-page indictment does not describe any new evidence against either politician. It is, however, the first time that the grand jury has jointly charged Turner and Wilkerson in the corruption investigation.

The indictment also charged Turner with three separate counts of making false statements, detailing three specific instances in which he allegedly lied to FBI agents about accepting a $1,000 bribe. He is now charged with five felonies and is expected to be arraigned in US District Court on Wednesday afternoon.

Quite a busy day for courthouses across the country.

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