image ripped from Jalopnik

Like many Americans, I watched the Superbowl and commercials with equal enthusiasm and enjoyed both. I thought the Clint Eastwood Chrysler ad at halftime was excellent. It never occurred to me that this was an overtly political ad, or endorsing Obama’s re-election, or supportive of corporate bail-outs. Who knew? Apparently I am not sufficiently politicized to recognize the offensive polarizing nature of the ad.

I naively saw the ad as simply a straight-line continuation of the theme and style of Chrysler’s excellent “Imported from Detroit” Eminem ad last year. [My Donk permissions do not permit me to embed the videos, but the 2011 Eminem ad is linked here and the 2012 Eastwood ad is linked here.]

Themes common to both ads include: Strength and resolve overcoming adversity; A focus on pride of place – (Detroit for Eminem – generalized to America with Eastwood); Dramatic uplifting music; A popular, way cool, instantly recognizable celebrity hinted at throughout the ad, emerging at the end, then dramatically delivering the money quote directly to the camera.

They are practically the same ad.

The purpose of advertising is to sell a product. The purpose of this ad is to sell Chrysler cars. Advertising sells cars by creating an image and cachet that buyers find attractive and associate with the car. This ad succeeds in this endeavor without ever showing the car.

Chrysler had\has an image problem. Along with GM, Chrysler suffered a serious black eye with the American public. Cerberus – the private equity firm that bought Chrysler from Daimler Benz cut its losses by means of of a government bailout and a managed bankruptcy with heavy handed terms dictated by the Obama administration. At the end of the day, Chrysler was purchased by Italian car manufacturer Fiat, mostly because no one else would buy it.

All of this was considered rather unseemly and distasteful to American car buyers at the time, but that was all in the past way back two years ago. Now we have a resurgent automobile industry with Chrysler cars “Imported form Detroit” creating jobs in America and competing with foreign manufacturers. Right? Well… not quite:

These ads are great because they succeed in wrapping Chrysler and their cars in the image of a resurgent Detroit and project a message of resilient Americans fighting out of an economic downturn – all delivered by respected and well-liked celebrity personalities.

If there is a political message to found here, it has nothing to do with the advertisement itself. The ad is doing exactly what any good ad should do. In fact, it does more - Memeorandum is tracking reactions, people are writing columns about it, it is being posted on blogs and social networks. Chrysler is getting more than their money’s worth from this spot.

The political problem is with the underlying company. The problem is with the moral hazard unleashed when they were bailed out with taxpayer money. The problem is with the subsequent heavy handed politically motivated machinations orchestrated by the Obama administration in the bankruptcy proceedings. I would not want to buy a car from that company.

I’d rather buy a car from that other company. That Halftime in America, Clint Eminem, Imported from Ohio Illinois Canada Mexico Detroit company. You know the one I mean… Fiat.

UPDATE:
You had to know this was coming. The Parody is linked here.

^{x-posted from “The Dividist Papers“}

The move will save nearly 2,500 jobs.

From The Street:

Hard-hit Kokomo, Ind., got a big boost from Chrysler on Tuesday when the automaker announced it plans to pump another $843 million into three factories to build a new front-wheel-drive transmission.

General Motors, meanwhile, will announce Wednesday that it will invest $163 million in two Michigan plants and an Ohio foundry to make small-car engines, according to a person familiar with GM’s plans. The person was not authorized to talk about the plans ahead of the formal announcement and asked not to be identified.

But wait, there’s more from Chrysler…

Chrysler said the new investment, to start early next year and run through the third quarter of 2012, would raise the company’s commitment to the Kokomo plants to $1.1 billion, pushing its total U.S. factory investment to nearly $3 billion since it emerged from government-funded bankruptcy protection in 2009.

And everybody heard that GM IPO’d this week, right? And it was the biggest IPO ever?

More as it develops…

Shikha Dalmia at Forbes goes beyond opinion and actually does the homework:

I wonder – Does Mike Thompson really believe that anyone beside himself would uncritically accept the GM PR, advertising, and administration spin at face value and say “I told you so!” C’mon, Mike. Who would do that?

But I digress. Shika explains how the shell game worked:

I said this was like a carny shell game, but that is not fair – to the shell game. In a shell game a bean is presumed to be placed under one of three cups, and the mark is fooled by quick manipulation of the cups into guessing and betting incorrectly where it might be found.

In GM’s case, the administration just keeps stuffing more and more of our money into the company’s pockets, the company moves some of the money from one pocket to another, gives a little back, and finally both the company and administration publicly misrepresent what is taking place. When all is said and done, GM winds up owing taxpayers more money than before they “repaid” the loan.

But, no worries. We’ll get the money all back. Someday. Over the rainbow. Just as soon as the 72.5% of GM company stock that US and Canadian taxpayers own is worth as much as they are owed and can be safely sold to repay it. The GAO suggests this may happen just as soon as….

… hell freezes over.

Hat tip to McQ at Questions and Observations who sums it up with this depressing observation:

In the meantime, as taxpayers, we can take comfort in the knowledge that our money is being used to prop up a failed competitor and make life harder for the Ford Corporation. Ford is a well run American company that took the hard management decisions necessary to survive in a tough environment and made the right management decisions to earn the respect of all Americans. Ford continues to innovate and build new products out of their own capital and profits, not requiring or requesting any government handouts. And we are all paying to subsidize their competitors.

We can all sleep better knowing that our tax dollars are being used to undermine a great American company that did the right thing by reanimating their zombie competitors.

I guess I’ll just have to be satisfied with the knowledge that since GM and Chrysler took my money against my will, they’ll never get a dollar from me willingly to buy one of their cars. It’s something.

Cross-posted from Divided We Stand United We Fall

And they could break even this year. So while they won’t be paying back the government loans as soon as GM, they’re still on track to meet their obligations in the future.

More from Wash Post:

Chrysler, which emerged from bankruptcy last June, reported Wednesday that it lost $3.8 billion through the end of the year but expects its operations to break even in 2010. [...]

For the first quarter of 2009, the company reported a net loss of $197 million, suggesting that it has largely curtailed its losses from last year. The automaker highlighted figures showing that the core of its business, the selling of cars and trucks, is sound. It had an operating profit of $143 million in the first quarter — a significant improvement over the end of 2009, when it lost $267 million on its operations.

Chrysler also said its U.S. market share, which had plummeted to as little as 8 percent, rose to 9.1 percent in the first quarter. Chrysler attributed the first-quarter results to cost cutting and sales of the new Ram Heavy Duty pickup truck. Worldwide vehicle sales were 334,000 units for the first quarter of 2010, up from 318,000 in the last quarter of 2009.

So, a lot of encouraging news here and, as I’ve said many times, this was never an ideal situation…but it was a necessary one. We couldn’t allow an economic collapse to put our American-owned manufacturing base out of business.

More as it develops…

Yep. We’ll never see that money again. And certainly not 5 years ahead of schedule.

Just like we’ll never see the TARP money again.

From the AP:

GM got a total of $52 billion from the U.S. government and $9.5 billion from the Canadian and Ontario governments as it went through bankruptcy protection last year. At first the entire amount of U.S. aid was considered a loan as the government tried to keep GM from going under and pulling the fragile economy into a depression.

But during bankruptcy, the U.S. government reduced the loan portion to $6.7 billion and converted the rest to company stock, while the Canadian governments held $1.4 billion in loans. Those loans were repaid Tuesday, five years ahead of schedule.

The automaker hopes to repay the remaining $45.3 billion to the U.S. government and $8.1 billion to Canada via a public stock offering, perhaps later this year. The U.S. government now owns 61 percent of the company and Canada owns roughly 12 percent.

And just like with the TARP repayments…we’ll make a profit.

In fact, we’ve had $186B paid back and less than $200B is outstanding. So, if we get it all back in the next 2 years…will we get some recognition from conservatives and libertarians that doing this was better than letting our banking system collapse and driving us into a second Great Depression?

I’m just saying…

Who’s this guy?

Meet Kenneth R. Feinberg, the new pay “czar” for the White House. He’s tasked with reigning in the out of control compensation at companies the government helped recently.

I think it should be noted right off the bat that this is tied to executive compensation and bonuses…two pots of money that are so out of step with compensation in the real world it’s obscene. I mean, one year after all of these places went under and they’re giving out billions in bonuses?

Here’s more from Wash Post:

The cuts will affect 25 of the most highly paid executives at each of five major financial companies and two automakers, according to the sources, who spoke on the condition of anonymity because the plan has not been made public. Cash salaries will be cut by about 90 percent compared with last year, they said.

The administration will also curtail many corporate perks, including the use of corporate jets for personal travel, chauffeured drivers and country club fee reimbursement, people familiar with the matter have said. Individual perks worth more than $25,000 have received particular scrutiny.

And here are the companies affected…

The seven companies under Feinberg’s purview are Citigroup, Bank of America, General Motors, Chrysler, GMAC, Chrysler Financial and American International Group. These firms have received a total of about $250 billion in bailout funds from the Troubled Assets Relief Program, adopted last year by Congress, and benefited from hundreds of billions of dollars more in government guarantees and other support.

Personally, I’d like to see executive pay at publicly traded companies capped at a set price with stock options/bonuses only triggering when those folks actually produce provable results. But this “failing up” nonsense that CEOs continue to do decade after decade is ridiculous.

Of course I know this won’t happen because Wall Street firms will continue to claim that these compensation models are key to attracting the right talent, even though there are usually dozens of qualified applicants for every position they have.

Still, one can dream…

Lots of “clunking” going on this morning at the Donk, but it’s the hot topic and since this criticism comes from a Dem I thought it worthy of pointing out some opposition from my side of the fence.

From her Tumblr blog:

Of course the cash for clunkers program is popular, we’re giving away money.

My concerns are first, that we are just moving demand around, and that the sales in this program are robbing sales from 2, 3, or 12 months from now when we are going to still need sustained growth in our economy. Remember, around 60,000 to 70,000 people are trading their cars in for new ones every month without this program.

Second, I haven’t yet gotten clear answers on how many deals are currently in the pipeline and how they will wind this program down in a way that will give certainty to buyers and dealers.

Third, I’m worried that an extension right now will penalize the two companies that we just made huge taxpayer invesments in. I’m trying to verify, but I believe, based on my conversations with dealers and other research, that Chrylser and GM both have inventory issues with the cars that qualify for this program. Seems weird we would invest billions of taxpayer dollars in two American companies in an effort to save them, and then extend a program that could penalize them.

I realize all car sales, both foreign and domestic, are good for the economy, but I hate the idea that there may not be a level playing field for the next few weeks because of inventory issues.

I’ll take these one by one.

First, yes, it’s giving money away. But that’s what we’re doing with stimulus dollars anyway, and there’s always some amount of wealth redistribution when you do that. As far as shuffling demand around, I don’t know that I buy that. An additional 3 to 4 grand can turn somebody into a buyer fairly quickly, especially when you’re talking about smaller, lower priced, more fuel efficient cars.

Second, I agree that it’s not clear, but one has to imagine that if it does go over we’ll figure it out so consumers don’t get screwed. After all, we’re talking about a couple billion dollars here and why we’re even fighting about it seems silly to me. This is a drop in the bucket, but it means A LOT to consumers.

Third, when people buy 250,000+ cars in a week, America benefits. Not only that, if GM and Chrysler are running out of stock, well, that’s a good thing…is it not? After all, one of the biggest problems they had was too much inventory. This will help them wind that backlog down. And yes, she’s right that there will be spillover to foreign car makers…but I doubt many of those cars are being shipped over. Most foreign car companies make their autos here, so it’ll ultimately benefit our economy. Personally, I don’t see the problem, and if McCaskill wants people to buy GM and Chrsyler, propose upping the amount of rebate somebody gets for those two brands.

What do you think?

TIMES crunches the numbers and comes up with some encouraging data…

The initial data released by Department of Transportation, however, shows that so far cash for clunkers has been a green success. The clunkers averaged 15.8 m.p.g., compared with 25.4 m.p.g. for the new vehicles purchased, for an average fuel-economy increase of 61%.

On the whole, American drivers are trading in inefficient trucks and SUVs for much more efficient passenger cars. Car manufacturers like Nissan are already retooling some models to improve their fuel economy so they can qualify for the credits.

But they rightly points out the potential pitfall in this situation…

It’s called the efficiency paradox: as we get more efficient at using energy — through less wasteful cars and appliances — the overall cost of energy goes down, but we respond by using more of it. In the case of cars, that means driving more. Ultimately our gas bill stays the same, but we spend more time on the road and pump the same amount of greenhouse-gas emissions into the atmosphere. The earth isn’t any better off.

This is one reason why it makes sense to have gas at a fixed cost that doesn’t go below that. Car makers have long be clamoring for this because without it the CAFE standards that the government sets don’t push people to buy the more fuel efficient cars if gas is cheap.

Is raising the fuel prices to a set level next on the Dems’ agenda? If not, should it be?

A new website for the controversial, popular program is up and it includes some things you need to know if you’d like to take advantage.

• Your vehicle must be less than 25 years old on the trade-in date
• Only purchase or lease of new vehicles qualify
• Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements)
• Trade-in vehicles must be registered and insured continuously for the full year preceding the trade-in
• You don’t need a voucher, dealers will apply a credit at purchase
• Program runs through Nov 1, 2009 or when the funds are exhausted, whichever comes first.
• The program requires the scrapping of your eligible trade-in vehicle, and that the dealer disclose to you an estimate of the scrap value of your trade-in. The scrap value, however minimal, will be in addition to the rebate, and not in place of the rebate.

So what are your thought about the program? Will you take advantage of it?

It’ll be a while before we know if this arrangement will work or not, but I can’t help but think a new G.M. that builds better, greener autos will be competitive in the future.

From NY Times:

“We deeply appreciate the support we’ve received during this historic transformation and will work hard to repay the trust and the money that so many have invested in G.M,” the chief executive, Fritz Henderson, said just a couple of hours after the company closed the sale of its good assets to a new, government-backed carmaker.

“The last 100 days has shown everyone, including ourselves, that a company not known for quick action can indeed move very fast,” Mr. Henderson said. “Starting today, we want to take that intensity, the decisiveness and the speed of these last several weeks, and transfer it from the battlefield triage of the bankruptcy process to the day-to-day operations of the new company.”

G.M.’s goal, Mr. Henderson said, is to design, build and sell the best vehicles in the world, something that the company had forgotten. He listed the company’s priorities, in order, as its customers, its cars and its culture.

Here are some of the changes that have already happened…

The new company will be much smaller, with brands like Saturn, Hummer, Opel and Pontiac in the process of being sold or closed. It will also have a smaller sales network, with thousands of dealers having been cut during the reorganization.

Its management ranks also will be smaller. Mr. Henderson said the company is eliminating 35 percent of its executive positions, including the job of Troy Clarke, who has served as G.M.’s North American president. Mr. Henderson will assume control over the company’s North American operations, and he was not specific about Mr. Clarke’s future.

Also, it looks like they’re partnering with eBay to auction cars in California, so they’re already starting to innovate and find unique ways to connect with consumers.

What are your thoughts? Should they have been liquidated instead of going this route? And, if so, why would that be better for us?

Discuss.

Hello this is Mike Fritz from the American News Project. We have a new story out that focuses on those most affected by the bailout of General Motors: laid off autoworkers.

It examines one of the central tensions in the public takeover of the company: Should federal dollars be spent building a lean, mean business model that will please Wall Street and increase value for shareholders (i.e. American taxpayers)? Or, should there be some built-in conditions designed to set aside as many manufacturing jobs as possible for certain people (i.e. American taxpayers)?

Now that we all own 60% of the company, it may be a story you find worth the watch:

Interesting link to new corporate logos…

Not too many people are dancing over the news of GM’s bankruptcy, but opinions are decidedly mixed on what the government ownership of the car company will mean.

Lee Cary, of American Thinker sees the era of Government Motors dawning with coercive attempts to force a Green fleet onto American consumers. This, in Cary’s opinion, will be quickly followed by the unintended consequences, namely a falling market share followed by more government infusions of money, followed by tariffs on foreign automobiles, followed by retaliatory tariffs on American-made goods, followed by economic disaster.

How about Robert Reich, who has routinely applauded the Obama economic agenda? Well, he’s not exactly sunny either. Reich says the government part-ownership of GM will do nothing more than slow its inevitable demise. He accuses the administration of trying to have it both ways by appeasing autoworkers (who want as much bailout as possible) and average taxpayers (who generally oppose the government’s intervention).

So the Obama administration is, in effect, paying $60bn to buy off both constituencies. It is telling the first group that jobs and communities dependent on GM will be better preserved because of the bail-out, and the second that taxpayers and creditors will be rewarded by it. But it is not telling anyone the complete truth: GM will disappear, eventually. The bail-out is designed to give the economy time to reduce the social costs of the blow.

Certainly someone must think things could turn out just fine. Oh sure. There’s Michael Moore. He sees this as a great opportunity for the government to seize American industry in the name of fighting a war against global warming and dwindling oil supplies. He wants massive mass transit, he wants it now and he wants it built in GM factories by GM workers who would, of course, be government workers in Moore’s world.

Feel free to leave your own predictions/desires in the comments. As for me, I’m going to take some more antacid in the hopes of quieting a stomach turning circles over the prospect of a government-owned car company.

All the kings horses and all the bond deals couldn’t keep GM from cracking. As feared, the car giant has filed for bankruptcy. Now what?

The plan is for the federal government to take a 60 percent ownership stake in the new GM. The Canadian government would take a 12.5 percent stake, with the United Auto Workers getting a 17.5 percent stake and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.

Plus, GM could get an additional $30 billion in federal assistance for its reorganization. That’s on top of the $20 billion the company already received in the form of low-interest loans.

More fallout: the Pontiac, Saturn, Hummer and Saab brands will be terminated or sold. And GM will no longer be listed as part of the Dow Jones industrial average.

Oh, and the majority owner of one of America’s most storied companies will now be the U.S. government – at least for awhile.

Good times. More soon.

This is an extreme example, but I can’t help but think car companies can easily hit the 35 MPG mileage standards Obama is about to lay out if the following is possible for a street ready car.

From Green Car:

Volkswagen’s CEO, Martin Winterkorn recently confirmed the company is working on a car that will get 235 mpg (1 liter per 100 kilometers) fuel economy. In 2002, VW showed its 1-Liter concept car that achieved 264 mpg (0.89L/100km). The project was cancelled in 2005 but VW has now revived it. How real is this? VW now says a limited production car could be offered by 2010.

The VW 1-Liter, developed in a wind tunnel, has a very narrow and very flat body configuration that necessitated tandem seating for the two occupants. Measuring in at 4.1 feet wide, 11.4 feet long, and just over 3 feet tall, the car features an amazing drag coefficient of just 0.159…even more wind-cheating than the slippery GM EV1 electric car’s 0.19 Cd. With its 235 mpg fuel economy, it can travel 400 miles on its 1.7 gallon fuel tank…all the while achieving a 75 mph top speed.

The future of cars is small and lightweight. Bet on it.

This is a pretty big stake in the ground, because they’ll be using California’s standards…the toughest in the nation.

No doubt you’ll be hearing that this is bad for business, but that’s what they said about seat belts, airbags and every other time CAFE standards were raised. And I think we’re all fairly aware that the car companies who’ve prospered are the ones who offered the highest fuel efficiency standards the earliest.

From NY Times:

President Obama will announce as early as Tuesday that he will combine that state’s emissions rules with the existing corporate average fuel economy standard overseen by the Transportation Department, the officials said. As a result, cars and light trucks sold in the United States will be roughly 30 percent cleaner and more fuel-efficient by 2016.

The White House would not divulge details, but environmental advocates and industry officials briefed on the program said that the president would grant California’s longstanding request to implement its tailpipe standards. Thirteen other states and the District of Columbia have said they intend to apply the same rules. That request had been denied by the Bush administration but has been under review by top Obama administration officials since January.

Yet Mr. Obama is planning to go further, effectively issuing a single rule for both fuel economy and emissions that matches California’s strictest-in-the-nation standards.

Under the new standard, the new combined fuel efficiency standard for cars and light trucks will be about 35 miles per gallon by 2016, roughly in line with the California rule.

In my mind this is a smart move for many reasons, not the least of which is you diffuse the emissions standards argument immediately. Yes, it will upset states rights’ advocates, but how does it makes sense that a state should be able to determine whether or not certain pollution levels are acceptable or how much mileage cars can have in their locale?

In other words, there are some things that must be mandated by the federal government, and this is one of them. Our long term strategic interests, both for the environment and our dependency on foreign oil, rely on one set of standards across the board.

More as it develops…

In a bid to survive bankruptcy, Chrsyler is closing nearly 800 dealerships, a full quarter of the company’s dealers. The dealers themselves had no say.

While bankruptcy may be a better long-term solution for Chrysler than continued government bailouts, the short-term will not be pretty. Car dealerships provide a lot of jobs and a lot of tax revenue for communities. They also tend to sponsor charity events and spend a lot on advertising, particularly in local newspapers which, as we all know, aren’t doing so well these days.

The National Automobile Dealers Association (NADA) has already launched a campaign calling on President Obama to act now to stop the Chrysler closings and the ones expected to affect over 1,000 GM dealers in the next few weeks and months. One of NADA’s talking points is that dealers, on average, pump $16.5 million per year into their communities. The lost revenue will be felt deeply in a lot of places.

But just because something is painful doesn’t mean it’s unnecessary. No one wants to see this kind of turmoil in what was once one of America’s proudest companies, but Chrysler simply can’t hope to continue without making cuts. Better to remove a quarter of their dealers now than to have to shutter them all in a year or two. That’s the raw and unfortunate calculus. But I’m sure that’s cold comfort to those who will lose their jobs.

Despite all the government assistance and talk of providing more, GM lost $6 billion last quarter with earnings dropping by 47%.

GM executives say car buyers are turning away from GM out of concern the company will end up in bankruptcy and won’t honor its warranties. Could the prospect of bankruptcy help force bankruptcy? To put it dramatically, is GM in a death spiral?

The company has until June to provide the government a restructuring plan. But another quarter like this past one is going to make Americans extremely wary of handing out yet another bailout.