It'll take a wing and a prayer

When you sign a pack with the devil, hell is right around the corner. And so it is with the "new" GM. I mentioned in earlier posts that government types would find it irresistible not to meddle with a reborn General Motors. After all, the $50 billion they threw at the company, the secured creditors they pushed under the bus, plus shepherding the company through a speedy process that abrogated all previous bankruptcy law, GM was going to pay the piper one way or another. Now we are seeing how.

Ugly payback actually began when President Obama and his government minions called for the resignation of CEO Rick Wagoner. GM's board happily obliged, with Wagoner's head promptly delivered on a silver hubcap. In desperate need of immediate cash, what else could the board do? But this sent the first message to Washington that they did, indeed, have the power to remake GM in their own, dare I say, distorted bureaucratic vision.

Next to follow, with some good old fashioned arm-twisting Obama is now famous for, was GM's reversal of building a new sub-compact car in China. "No way," said the president and his hatchet men at the UAW, "the car must be built in the USA!" And so GM again capitulates and presto, GM will assemble the car in the soon to be remodeled Michigan Orion plant. Forcing the company to build a green car stateside is one thing. Expecting a profit is pure fantasy. But who would presume two entities, Washington and the UAW, that have never garnered a profit on anything they have ever touched, to understand the business decisions necessary to actually make money. How do we know GM won't make any greenbacks on the new compact? Because every other manufacturer, domestic and imported, has studied countless business plans, each with the same conclusion: you cannot make any profit on a sub-compact built in the USA. That the Asian car companies see this says everything about GM's future earnings. And Fritz Henderson, GM's current CEO, says he wants to repay the 50 billion borrowed back to the American taxpayer? How's that going to work when you make no money building cars? Isn't that what got GM in its fix before. Oh, never mind.

Of course, the curse isn't complete until the US Congress gets its grubby little hands in the mix, which they did last week. The U.S. House approved a bill in a 219-208 vote to reverse the closing of more than 2,500 GM dealers. General Motors currently has over twice the number of dealerships they need to do business in North America and had taken rapid steps to address that. But that's a little too fast for government. Nor does it make "sense" to a deliberative body that annually spends more than they take in. Tell me what our deficit is this year... over a trillion?

It should be patently obvious to even a first-year business student that trouble in profit land is brewing for the new GM. But this go round is different from the past. This time GM has a valid excuse: "The Devil made me do it!"

Drive in the damn street!

Hey, what was it with 50s advertising that cars were shown in the oddest of places either being driven or parked? I suppose the Cadillac in the lobby makes for easy coming and going to hoity-toity events.



And to the couple in the Mercury, watch those steps!



"Hey, bitch in the T-bird, get off my grass!"



"Man, you're cracking the pool apron!"



"I said, you're cracking the damn pool apron!"

Roadside Grub Horrors #1

A friend sent this to me. Don't know who authored it, but F U N N Y!

Krispy Kreme Cheeseburger, a.k.a. Luther Burger

This is it. The razor’s edge of what can reasonably be thought of as food: A bacon cheeseburger with 2 glazed doughnuts in place of a bun. Mankind should be remembered for its greatest achievements -- space flight, the cure for polio, the pyramids -- but shades of this monstrosity will outlive the roaches.

Tastes like: The gastronomic equivalent of finding out you were adopted.

My Suggested GM Ad

Click on ad for a larger version.

Remind me again how this is supposed to work.

GM, now 60% owned by Washington, will take it's marching orders from Congress, the President... hell, maybe even your local postman. You think I'm joking?

Several House members have already started to complain about GM's dealership closings. On behalf of their constituents, local car dealers in this case, some congressmen are mixing politics with business and already hampering the new GM's ability to make money.

That portends well for the company's future profitability, as the government's management of Amtrack, social security... hell, even the post office, will attest.

Pinch me please, I want out of this nightmare.

Michael Jackson's Auto Collection

Well, he might have had a love for music and the talent to match, but Michael Jackson's collection of cars was both tired and somewhat creepy. Two Rolls, both characterized by an elaborately ornamental baroque style of interior decoration and a very late model Lincoln made up his fleet of limousines.

A Ford van looking very 80s and a rather decrepit GMC rounded out the family's transportation needs.

The bus was used for what? He hadn't toured in years. Perhaps it carried him and his entourage of children and bodyguards on his infamous shopping sprees. Or the courtroom.

The mega-star was oblivious to great cars. This trashy assortment of vehicles will probably bring a handsome sum at auction. But only because of who owned them, not because they were great in any stretch of the word.

So...How's your day going?

My Suggested Chrysler Ad

Click on the ad for a larger version.

The Copy Reads:

Mediocrity Reborn

Why bother to buy our cars?
You already bought the company.

Make no mistake.
We express sincere gratitude to the American taxpayer.

Your largess, with a little arm twisting by the President,
means it’s business as usual from one of Detroit’s Big Three.

Ditching our securitized debt, dropping Republican dealers
and generally blowing off any obligation we didn’t want to honor,
we are now free to return to the same bad habits
that got us into this mess to begin with.

Our factories are reopening, anxious to slap together
the poorly built cars and trucks that puts us at the bottom
of every quality survey ever conducted.

The same tired models that you wouldn't buy before,
will start languishing again on your local Chrysler dealer lots.

But there’s a difference this time.
With the UAW covering our back, Uncle Sam will continue
to fund our losses for years to come. Or someone else gets elected.

You may choose not to purchase a Chrysler product in the future.
But you’ll have no choice paying for it again and again.

Chrysler Group
Driving American Debt

Here We Go Again

At the start of 2008, gasoline prices were on their steady climb to $4.00 a gallon. Car buyers were clamoring for fuel efficient automobiles. The mad dash for 30 mpg or more was the mantra shoppers embraced. Hybrids sold like hotcakes. Toyota couldn't keep a Prius on the lot. Most people thought the era of cheap petrol was over.

It is.

Although we may witness a temporary decline in barrel prices now and again, the price of gasoline will return to the $4 gallon because oil producing nations in the Middle East, Russia, Mexico and Venezuela, to name a few, need the higher prices to fund their countries. And Washington will do nothing to boost domestic production.

You need look no further than the pump for evidence. In the last few months, crude oil prices have more than doubled — to $72 a barrel from $33.55. Gasoline prices have surged 62 percent to $2.62 a gallon from $1.62. After just a few months of relief at the pump, cheap gasoline is disappearing.

But what did people do when prices went down by January of 2009? They bought big. The mad dash became a major retreat. And the response? General Motors Corp. pulled the plug the hybrid-electric version of the Chevrolet Malibu sedan for the 2010 model year due to slow sales that led to a backlog of inventory of the vehicles on dealer lots. May 2009 sales of the Toyota Prius were off 30.2 percent from a year ago, to 10,091.

Where is the sense to it all? As a car buyer in June of 2009, do you really expect gasoline prices to remain low for the next ten years - the average age most Americans keep their automobiles before trading? If you aren't willing to educate yourself to the oil commodity market, than at least exert some old-fashioned common sense. Gas won't be cheap in the future. How could it be?

Investor's Business Daily had this to say (June 11, 2009) about current rising prices and what Washington is doing about it: "In a classic case of the doubletalk we've all become familiar with, the administration is moving in exactly the opposite direction. Its cap-and-trade plan punishes those who produce and use domestic energy. It has proposed eliminating all tax incentives to produce oil and gas, and has slapped a 13% excise tax on all energy coming from the Gulf of Mexico."

"Interior Secretary Ken Salazar has canceled 77 oil and gas leases that were assigned to Utah. He stopped plans to lease oil shale rights in five Western states estimated to hold between 1 trillion and 2 trillion (with a "t") barrels of recoverable oil. The Obama administration has decided not to issue leases for gas well drilling on the Roan Plateau in Colorado."

Ok, so not surprisingly, Washington will do the wrong thing. Where are we headed?

"I wouldn't be surprised if we're testing $80 in a week or two," said one oil analyst, while BP's chief executive, Tony Hayward, questioned whether $90 could be the "right" value.

Kuwait's oil minister, Sheikh Ahmad al-Abdullah al-Sabah, put some of the rise to signs of recovery in Asia, but warned that Opec would not raise supply at current oil prices unless "it reached $100", he said.

Alexei Miller, chairman of the Russian energy group Gazprom, raised the stakes further when he reiterated last year's estimates of $250 a barrel. "This forecast has not become reality yet, given that the [credit] crisis gained momentum and exerted a powerful impact on the global energy market. But does this mean that our forecast was unrealistic? Not at all."

So there you have it folks. While those about you continue to exercise bad decisions, you needn't. Just imagine $4 a gallon gas if you are shopping for a new car in the next few months. It won't take your imagination in the near future.

Supreme Court to Drive Decisions

It was bound to happen. A secured bond holder in Chrysler is contesting the sale of "good" assets to Fiat and aims to block the transaction. Indiana pension funds, which contains retirement savings for the state's teachers (among others), filed papers Saturday (June 6) seeking a Supreme Court review allowing the sale. The funds have asked Justice Ruth Bader Ginsburg, who handles emergency requests, for an order blocking the scheduled transfer of assets on Monday, June 8 to the Italian automaker until the high court decides whether to hear the funds’ appeal.

Ginsburg's decision could seriously complicate the "fast track" bankruptcies of Chrysler and GM. If she deems the claim worthy of consideration, it will derail the reorganization process and could potentially throw both car companies into liquidation instead. We may well know the outcome before the end of today.

Let's analyze the suit. Indiana pension funds lent Chrysler $42.5 million. They want their money back! They will get nothing if the deal with Fiat goes through. They may not get much more in liquidation. The funds suit, however, is hedging on a technicality in the law that may not pass muster: Indiana pension funds contend the Fiat deal is a misuse of the Troubled Asset Relief Program (TARP), which they say was intended for financial institutions, not car makers.

What does TARP allow? It provides United States Department of the Treasury to purchase or insure up to $700 billion of "troubled" assets. "Troubled assets" are defined as "(A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability; and (B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress." No mention of car makers there!

That would appear to favor the funds. But here's the fly in the ointment. On December 19, 2008, President Bush used his executive authority to declare that TARP funds may be spent on any program he personally deems necessary to avert a financial crisis, and declared Section 102 to be nonbinding. This allowed Bush to extend the use of TARP funds to support the auto industry, a move applauded by the United Auto Workers.

That the Act’s criteria for participation remains very unclear has been recognized from the outset of TARP. Yet, there is a provision for a judicial review of Treasury activity. Specifically, Treasury actions may be held unlawful if they involve an abuse of discretion, or are found to be “arbitrary, capricious . . . or not in accordance with law.”

My prediction? Indiana pension funds will lose. The political momentum for both Chrysler and GM's fast track bankruptcy will not be hindered by any one force: judicial, legislative or executive. The cards have already been dealt by a corrupt dealer: the U.S Government. The rule of law was trounced way before this suit when the bondholder's rights were thrown under the bus at the outset of the Chrysler, and later GM, bankruptcy. Strong-armed by the thugs in the Fed, those sweet little old retired teachers in the mid-west understood math and science, but didn't bother to learn the history of Washington politics. Their loss.