December 2008

It's a Friggin' Christmas Miracle: Bush Comes through for the Auto industry?

It's a Christmas "Miracle", George Bush came through. $13.4 billion for the auto industry. Or maybe, not so fast. This is a stay of execution, not a pardon.

The troubled U.S. auto industry will receive emergency loans of $13.4 billion from the federal government in return for an extensive restructuring of its outstanding debt and labor costs over the coming year, according to administration officials.....

Funds for the loans will come from the Troubled Asset Relief Program initially set up to aid the financial industry. An additional four billion will be available in February.

But the money will come with some extensive strings attached. Though the White House will not appoint a "car czar" to oversee the industry going forward, the companies will have to restructure their wage agreements so that they are competitive with foreign automakers by the end of next year. In addition, by March 31 of this year the companies will have to show they are financially viable and able to repay the government -- a requirement that may, for example, force them to renegotiate outstanding debt and other agreements.

Be afraid, be very afraid. Although this money is going to push the industry through till March, a whole new set of challenges await the President-elect come March. First, let's set lay down a few facts to start the discussion.

The Big Boys Are Threatening to do..... What Hitler Couldn't Do

Uh oh, first episode of wage deflation

FedEx is the first company to announce that it will cut its workers' wages:

FedEx on Thursday moved to slash employees’ salaries and other benefits in the face of what Fred Smith, chief executive, called “the worst economic conditions in the company’s 35-year operating history”.

The Memphis package delivery company, which has this year shed about $1bn in costs, reiterated that it expected earnings per share of $3.50 to $4.75 this year.

Named DOL Secretary Pushed to Labor Arbitrage U.S. Workers - Congress Rep. Hilda Solis

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Ut oh. Obama passed over true middle class advocate, Congresswoman Rosa DeLauro for yet another Corporate H-1B Guest worker Visa pusher.

Solis cosponsored the STRIVE act, the most notorious labor arbitrage bill targeting American workers, especially those in the Professional (STEM, S&T) career areas.

Madoff Ponzi Scheme Could Cause $17 Billion in Lost Tax Revenue

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This title is most amusing, Madoff Scandal May Cost Tax Revenue, where the estimates of lost revenue are as high as $17 Billion dollars.

Considering we have $8 trillion in pledges to the financial industry while Congress and the Bush administration pound on a poor auto workers union and AIG doubles it's executives salaries, doesn't $17 Billion seem trivial?

Now Bush is "Considering Orderly Bankruptcy" for the U.S. Auto Manufacturing Sector

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U.S. auto manufacturing being hung out to dry? It sure looks that way!

Today Bush said he is considering an 'orderly' auto bankruptcy.

Uh huh. Anyone know of an orderly bankruptcy that didn't cause thousands of job losses? The automobile manufacturing supply chain is heavily OEMed. This means an entire chain of businesses, suppliers are involved in making cars and trucks.

Bush:

Time to Claw Back Wall Street's bonuses for Fictitious Profits

Back when the execrible Wall Street Bailout bill was before Congress, The New York Times and also Barry Ritholtz of The Big Picture blog called for a "claw back" provision to the TARP program, pointing out that at the same time as Wall Street firms needed nearly $1Trillion from taxpayers to stay solvent, their CEO's and other senior executives were keeping monstrous bonuses for what turned out to be fictitious profits. Writedowns in the $ hundreds of billions had completely wiped awary the alleged profits of years' past.

Needless to say, that paeon fell on deaf ears.

Today CNBC has an article on exactly how egregious those bonuses were.

On Again, Off Again, Paulson Now Says Auto Bail out from TARP will happen "quickly"

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Does this sound like yankin' one's chain or what?

Bloomerg quotes Treasury Hank Paulson as saying:

Treasury Secretary Henry Paulson said U.S. automakers will receive a federal aid package as soon as the government can draft a suitable plan that ensures the companies’ long-term survival.

“The autos will get the money as quickly as we can prudently do it,” Paulson said today in a CNBC interview. “Right now what I’m thinking about is autos.”

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