GM, Chrysler Could Have Ended Up In Bankruptcy Sooner

The 2009 bankruptcies at General Motors and Chrysler were a historic moment for the Midwest economy. But a new memo published this week by The New Yorker shows that they were in danger of happening even sooner.

The insight can be found starting on page 36 of a 57-page memo by Lawrence Summers, written to President-elect Barack Obama on Dec. 15, 2008. The memo provides an in-depth look at the thinking that went into drafting Obama’s economic recovery plan.

At the time of the memo, Congress was considering emergency financing for car companies, who had been unable to borrow money from the nation’s banks. The Bush administration also was considering whether to use money from the Troubled Asset Relief Program, originally intended to rescue struggling banks. Continue reading “GM, Chrysler Could Have Ended Up In Bankruptcy Sooner”

All Eyes In Detroit Are On The Auto Show

Media previews for the North American International Auto Show kicked off this week, with plenty of panache and swagger.

Carmakers are rolling out dozens of new models at the show, ranging from Cadillac and Chevrolet, to Ford and Lincoln, and German automaker BMW.

Japan’s two struggling giants, Honda and Toyota, hope to make a comeback in 2012 after dismal results in 2011.

The auto show always features splashy introductions. Here’s a look at the new Ford Fusion from our friends at Michigan Radio.

Are you visiting the show? Do you some favorites?

Ford, Chrysler And General Motors All In The News Today

Today’s news cycle has prominently featured the U.S. auto industry. Here’s a quick roundup of three stories about Detroit’s Big Three making news this afternoon:

Photo by Slobodan Stojkovic via Flickr.

1. Ford Reinstating Dividends. Ford will reinstate its quarterly dividends in 2012, the company announced Thursday. “We have made tremendous progress in reducing debt and generating consistent positive earns and cash flow,” Bill Ford, executive chairman, said in a statement. Ford will pay five cents per share to holders of Class B and common stock as of Jan. 31, 2012. Payments will be made on March 1. Ford had suspended its dividend payments more than five years ago, as the company grappled with the recession. Now, it has posted 10 consecutive profitable quarters, according to the Los Angeles Times.

2. GM Chief Shakes Up Detroit. For generations, executives at the Big Three adhered to a code of conformity and predictability. More recently, that culture has been shaken up by outsiders. None are having a more dramatic impact than General Motors CEO Dan Akerson, according to Bill Vlasic of The New York Times, who profiles the senior executive today. Vlasic examines Akerson’s handling of the recent federal investigation into the Chevrolet Volt plug-in hybrid. By offering to buy back Volts from concerned owners, Akerson adopted an “aggressive – and potentially risky – strategy,” said one analyst. Akerson saw the company’s reponse to the crisis as a potential defining moment, Vlasic writes.

3. Detroit Comeback Featured In Time. The comeback of the American auto industry has reached the front page of Time Magazine. The lead story of an issue that hits newsstands tomorrow examines the resurgence of a domestic industry that faced extinction only three years ago. Specifically, the weekly news mag looks at Chrysler and the role of CEO Sergio Marchionne in boosting sales 23 percent in October 2011 year over year. The headline: “How America Started Selling Cars Again.”

 

Midwest Memo: Sears Spurned In Illinois And Courted By Ohio, Chrysler Sales Skyrocket, Dayton Seeks Immigrant Influx

Three stories making news across the Midwest today:

1. Dayton seeks immigrant influx. Among industrial Midwest cities seeking to stop a population hemorrhage, Dayton, Ohio hardly stands alone in its attempts to attract highly educated immigrants. What’s unusual in Dayton is that the city wants the rest of the immigrants too.  City Manager Tim Riordan tells our partner station WBEZ that welcome all immigrants regardless of skill or wealth will create “a vibrancy” in the city. Dayton’s population sank 14.8 percent over the past decade to 141,527 in the 2010 U.S. Census, a steep decline from its all-time high of 262,000 in the 1960s. Currently, foreign-born residents account for 3 percent of the city’s residents. But Riordan says newcomers are already building foundations in the western Ohio city.

2. Chrysler sales skyrocket. Driven by rising consumer confidence, Chrysler reported today that sales rose 45 percent in November year over year. Brand sales rose 92 percent thanks to increased demand for the 200 and 300 sedans, and Jeep sales increased 50 percent from November 2010. General Motors and Ford are both expected to release monthly sales numbers later today. “Consumer confidence is really what’s going to underpin us as we go into 2012, so we’re really pleased to see that showing up,” GM’s Don Johnson tells our partner Michigan Radio. Industry sales appear to be on pace for 13 million units in 2011.

3. Ohio courts Sears. Two days after Illinois lawmakers jilted Sears Holdings Corp. in its attempt to win tax incentives worth $100 million from the state, the Chicago-based company has a new suitor. Ohio has offered Sears incentives worth four times that amount to relocate its headquarters and 6,200 jobs to the Buckeye State. Texas is another state aggressively courting the company, according to the office of Illinois Gov. Pat Quinn. His counterpart, Ohio Gov. John Kasich, declined to confirm or deny an offer to Sears, joking with The Columbus Dispatch that, “we are somewhere between $0 and $400 million.”

Auto Industry Expected To Add 150,000 Jobs By 2015, Including Many In Michigan

LIVONIA, Mich. – A recovering U.S. auto industry should add more than 150,000 new jobs by 2015, and most of them will be located in hard-hit Michigan.

Analysts from the Center for Automotive Research in Ann Arbor said Tuesday that gains sales and market share, as well as savings reaped from recently concluded UAW contract negotiations, will allow Detroit’s automakers to expand their workforces.  The Big Three are projected to add approximately 30,000 new jobs over the next three years.

American Landscape, by Sheeler

But that’s a relatively small share of the overall projected industry growth. Suppliers are expected to account for the bulk of the increase across the country. Estimates say the auto industry employs 590,000 today and will employ 756,800 in 2015, a 28.2 percent increase. That year, sales of light vehicles are expected to hit 15.5 million units.

“They’re going to grow,” said Kristin Dziczek, assistant research director at CAR. “They’re going to have to.”

Managing that growth is trickier than it may appear. Automakers are fearful that suppliers have promised more capacity than they can actually deliver as demand grows. Many suppliers have been reluctant to ratchet up operations in case the boom never arrives.

Continue reading “Auto Industry Expected To Add 150,000 Jobs By 2015, Including Many In Michigan”

Midwest Memo: Chicago Budget Should Easily Pass, Toledo Gains 1,100 Jobs, Cleveland Eyes China Medical Markets

Three stories making news across the Midwest today:

1. Chicago budget vote tonight. Chicago Mayor Rahm Emanuel’s first city budget will be voted upon by the city council tonight. It is expected to be easily approved. The budget addresses a $635 million deficit through a series of layoffs, library and mental-health clinic cuts and fee increases. Our partner station WBEZ says the only question now is how the city’s 50 aldermen will vote, citing minimal opposition. “It could be six or it could be a unanimous vote,” Ald. Bob Fioretti tells the station. He said he worried Emanuel’s plan to nearly double fees for water and sewer service over four years will hasten an exodus of residents. But, “My yes or no vote isn’t going to mean anything,” he said. “I believe it’s already decided.”

2. Chrysler brings 1,100 jobs to Toledo. Chrysler announced today that it would invest $500 million at a Toledo assembly plant to build its next-generation Jeep SUV. The investment is expected to create more than 1,100 new jobs by 2013, according to the Detroit Free Press. The Toledo North plant will add a second shift. The plant, which opened in 1997, was the only Chrysler plant in North America operating only one shift, according to the newspaper.The investment comes as part of a $1.7 billion move centered around the Jeep SUV. Remaining funds will be invested at other Chrysler plants.

3. Cleveland biomedical companies eye China markets. There’s growing opportunity for Cleveland-area biomedical companies to meet China’s growing demand for advanced health care. The Chinese government has pledged $100 billion to upgrade its healthcare infrastructure, and “it would be insane not to take advantage of that immense growth,” Eddie Zai, founder of the Cleveland International Group, a business investment consulting firm, tells our partner station Ideastream. Zai’s new venture, the Cleveland Bio-Fund, is partnering with Newsummit Pharmaceuticals in Shanghai, to bring $100 million to U.S. medical device companies. The Plain Dealer endorses the developments, calling it, “an example of the kind of commerce that is the path to jobs and wealth.”

Second Look: Mitt Romney’s Position On The Auto Bailout And How It Plays In Michigan

Rick Snyder and Mitt Romney may have similar backgrounds – both born and raised in Michigan, both cultivated moderate conservative reputations en route to winning governorships in traditional blue states.

But when it comes to the federal bailout of the auto industry in 2009, the two politicians have starkly different positions.

Romney, as a Democratic political ad reminded viewers this week, would have let Chrysler and General Motors go bankrupt. He elaborated on that position in this week’s Republican candidate debate held in suburban Detroit. “They should have gone through a managed bankruptcy process,” utilizing a private-sector bailout that provided funds and time for restructuring, he said.

Snyder disagrees.

Continue reading “Second Look: Mitt Romney’s Position On The Auto Bailout And How It Plays In Michigan”

Mitt Romney’s Version of the Auto Bailout: Not Exactly How It Happened

Rick Perry’s stumble in Wednesday night’s Republican presidential candidates debate caught a lot of attention inside the Beltway. But Mitt Romney’s characterization of the auto bailout has also touched nerves — especially because parts of it seem to be wrong.

Romney’s opposition to the bailout is well-known, and in fact, Republican candidates by and large think it was a bad idea.

Asked about the auto bailout during a discussion of the economy last night, Romney said, “Whether it was by President Bush or President Obama, it was the wrong way to go.”

He went on, “We have capital markets. It works in the U.S.”

In reality, banks had refused to provide Chrysler and General Motors with the kind of financing the companies would have needed to restructure. Congress also refused to approve a bailout package. That was why the government stepped in to finance and speed the companies through Chapter 11.

Ford, which did not seek federal assistance, had borrowed billions of dollars from financial institutions before the financial crisis. But it do so by mortgaging virtually the entire company, including its blue oval logo. Continue reading “Mitt Romney’s Version of the Auto Bailout: Not Exactly How It Happened”

Midwest Memo: Big Three Report Higher Sales, Toyota Will Export U.S.-Built Siena, Pittsburgh Woos New Residents

Three stories making news across the Midwest today:

1. Big Three sales rise. Detroit automakers posted gains in annual sales Tuesday, although some leaps were not as large as anticipated. Chrysler showed the most significant improvement. Sales of its light vehicles rose 27 percent in October, year over year. Ford sales rose 6 percent overall and General Motors increased 1.7 percent, under expectations of a 5-to-7-percent increase. According to the Detroit Free Press, sales of the 2012 Ford Focus were largely unchanged over the year, but sales fell below the model’s chief competitor, the Chevrolet Cruze.

2. Pittsburgh seeks incoming residents. Upon winning $100,000, reality-show contestant Matt Kennedy Gould once dissed Disney World and proudly declared, “I’m going to Pittsburgh!” He’ll have some company. A promotional arm of the city is offering a $100,000 prize in a contest that aims to woo potential Pittsburgh residents. Officials seek what they call “experienced dreamers,” a euphemism for people 45 and older who are seeking a fresh start in a new city to “realize their dreams.” In New York City, the contest has some appeal. The blog Brokelyn notes, Pittsburgh boasts an unemployment rate below the national average and “the beer is really cheap.”

3. Toyota will export Siena. For the first time, Toyota will begin exporting the Siena from its U.S. assembly plant in Princeton, Ind. Shipments to South Korea are scheduled to begin in November. “We hope to continue boosting exports from our North American operations,” said Yoshimi Inaba, president of Toyota’s North American operations. In a written release, the company said it has exported several models of U.S.-made vehicles since 1988, and that overall, those exports increased 30 percent in 2010 to approximately 100,000 units. Sienna exports to South Korea are forecast at 600 annual units.

Midwest Memo: Chrysler CEO Predicts End Of Two-Tier Wage Structure, Indianapolis Jobs Announcement May Be Hoax

Three stories making news across the Midwest today:

1. Will two tiers vanish from auto contracts? One contentions round of contract negotiations just ended, Chrysler CEO Sergio Marchionne is already making bold predictions about what’s ahead when the current four-year contract ends. He said today that the automakers’ two-tier pay structure is not a viable one, and Chrysler and the UAW must find a way to merge two classes of workers next time. The structure is, “not something that can go on for a long period of time,” he said on a conference call to discuss the company’s second-quarter earnings. Marchionne continued, saying, two-tiers is “not a viable structure on which to build our industrial footprint.” Last month, Changing Gears reporter Kate Davidson examined the two-tiered wage structure and reported on its impact upon automakers and their workers.

2. Is Indianapolis jobs pledge a hoax? Only two short days ago, Indiana Gov. Mitch Daniels and Indianapolis Mayor Greg Ballard welcomed a California entrepreneur whose company would bring 1,100 jobs to the city. Two days later, there’s growing worry the company, Litebox Inc., and its owner Bob Yanagihara aren’t for real. The Indianapolis Star reviewed public documents that show Yanagihara owes “hundreds of thousands of dollars in state and federal tax liens” from the past decade, as well as money to investors who have sued him – and won. “I would strongly advise anyone thinking of investing in his projects to think twice,” Colin McGrath, who is owed $145,000, tells the newspaper.

3. Whirlpool will lay off 5,000 workers. Appliance manufacturer Whirlpool said Friday that it would eliminate 5,000 jobs across North America and Europe. The Benton Harbor, Mich.-based company cut its earnings forecast. Whirlpool CEO Jeff Fettig said the cuts came amid weak demand and higher costs. The cuts include 1,200 salaried positions, and company officials said overall, the layoffs will save approximately $400 million. There was no immediate breakdown of how the cuts would affect Whirlpool’s Michigan workforce.