What's Good for Cerberus Capital Managment Is Good for America
Disclosure first: I live in Southern California, and I'm almost certain they don't sell American cars here. The cops drive Crown Vics, but only to give the criminals a sporting chance to get away. Makes the freeway chases last longer. Good for ratings.
I guess I've rented American cars. I drove a Dodge Intrepid around Rhode Island one summer, and appreciated how much it handled like the aircraft carrier for which it was named. I drove an Oldsmobile Intrigue in Montreal a few years ago, and the most intriguing thing about it was the way it didn't start the second day and they had to tow it back to the airport.
The only actual autoworker I've ever met is the guy who wrote Rivethead, and he probably wasn't typical, at least I hope not.
I'm sure most autoworkers are the salt of the earth, though. Hard-working patriots from Bruce Springsteen songs, with only the occasional moments of existential doubt over unplanned pregnancies and brothers who ain't no good. Nothing that staring at a river wouldn't fix.
Only a tiny, tiny fraction of them are former death camp guards.
I'm all for good union jobs with health insurance and pensions. If you work hard you should be able to send your kids to school and eat, even when you're old. I thought that was the American Dream, before it got replaced with the right to stockpile ammo.
To sum up: Autoworkers are aces with me. And so are cars. Very useful for getting around.
That said, there are only two reasons to save an American car company: Nostalgia and nativism. And neither of those is a very good reason.
What do we even mean when we say, "the American auto industry?" Honda has been making cars -- like my Civic -- in Ohio since 1982.
Do we mean American capital? Because that's just silly. Capital flows freely. Or it used to.
So why is Honda on its own, while GM is our problem? Both have American workers and American customers. (Well, Honda has customers.) Is it because GM's founders were white, or because its management is native born? Do we owe the Ford family reparations for something I missed? Is this really how we operate?
I'm not saying nostalgia and nativism don't have their place. Lou Dobbs gives me the creeps, but lots of people like him. The worst thing about the automotive industry bailout is that it's insincere. It's preying on our nativist and nostalgic attachments to things that don't exist anymore.
There's no such thing as Chrysler. It doesn't even have any stockholders to save. If the bailout passes, your money will go directly to the hardworking men and women of something called Cerberus Capital Management, L.P.
Cerberus, named for reasons unknown after the mythical three-headed dog that drags souls to hell, is one of the world's largest private investment firms. By its own account, it has $25 billion under management in funds and accounts and significant investments in more than 50 companies that, in aggregate, generate more than $60 billion in annual revenues worldwide.
Including:
A Japanese bank called Aozora
A Japanese real estate company called Showa Jisho
A Japanese golf course company called Kokusai Kogyo
An Israeli bank called Bank Leumi
A German bank called Handel und Kredit Bankhaus
A reinsurance company called Scottish Re, with headquarters in Bermuda
A British TV rental chain called Boxclever
Telacris Biotherapeutics, which seems to make things out of blood plasma, or into blood plasma or something
A defense contractor called IAP World Wide
Bushmaster Firearms
Remington Arms
Panther Arms
Alamo Rental Car
250 Burger Kings
655 Albertson's
7 television stations
$30,000,000 worth of Mike Myers' "The Love Guru"
65,000 apartments in Berlin through GSW Berlin GmbH
Maybe you or your congressperson has a nostalgic attachment to some of those things. I don't.
Maybe Cerberus Capital Management L.P. should sell some of them, if they really need cash to stay in the minivan business.
Maybe they should stop using Chrysler to shake down the United States Treasury, like using a less-loved relative in a wheelchair to cut the line at Disneyland.
Read More:
Should the Government Bail Out the Big U.S. Three Automakers? HuffPost Bloggers Weigh In
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Missing in this discussion and that in the Mainstream Media have been a few facts. 1. That the Big Three build cars no one wants is false -- a lot of Americans bought all those trucks and SUVS. 2. That Toyota introduced the Prius to get its fleet MPG up; evidence: introducing the Sequoia, the Tundra, and the Land Cruiser, too. 3. That a "magic bullet' is not so much the problem in MPG or alternative fuels/elec
Americans don't save at a rate anywhere close to most industrialized countries. We want more stuff, cheaper stuff, and occasionally quality stuff, but as consumers we give no thought to how that comes about (so much for the informed citizenry advocated by the Founders). It's sickening watching Southern GOP members of Congress lambaste the Big Three car execs when the greenlighted billions without a thought for the Bush administrations wars and corporate giveways (like the BIG BONUS to the Big Pharma via Medicare) AND the strings pulled (tax abatements, relaxation of environmental regs, etc.) so that Daimler, Nissan, Honda, Toyota, etc. would build plants in union-hostile states.
looks like you got your wish, chris. =D
btw, your articles never fail to make me LOL like an idiot, sitting here at my desk. keep up the great work.
As Toyota saw a fall in truck sales, it closed it shops for 3 months (paying its employees) rather than continue to make trucks that would not sell. If GM followed that model, would that improve their bottom line? I checked out the LA autoshow (on-line), check it out...the majority of the cars do not appear to be in the Fuel Efficient category..
There does not seem to be a big effort by the Big 3 to be innovative or that they are feeling any pressure to actually produce a car that will address the needs of the 21st Century. The argument that the "little car" is not comfortable to travel long distances is invalid...
Unfortunately for the employess, I listened to the CEO testimony on CSPAN and they provided no information that was suggestive of automotive improvements. What they discussed was how they had cut employees, shut plants, etc. None of those actions were forward thinking, so how could anyone support the idea that more money would affect anything other than their bottom line to stockholders or top tier managers? Sorry, I just can't support more funding to a failing group of CEO's.
Until the recent spike in the price of gasoline, most American consumers wanted large gas guzzling carss. Most gasoline electiric hybrids (the Prius was the one exception) were selling poorly.
"The argument that the "little car" is not comfortable to travel long distances is invalid"
I am a big person and will buy a car into which I fit comfortably even if it means paying a high price for gasoline. But if I can get a big car that is a gasoline-electric hybrid - great!
I loved your article Chris. Really.
Did you catch the comment by the CNN reporter (I believe it was Tony Harris) who said that the Big 3 were going cap in hand to the Senate hearing - and yet they traveled in their own individual corporate jets.
At least they could have car-pooled. Or jet-pooled. (I added this last part).
These guys just don't get it. And if we keep bailing them out they never will.
This is an excellent article, Chris.
I am going to email it to Senators Bob Casey, D. PA., Arlen Specter, R. PA and Rep. Paul Kanjorski, D. PA.
Cerberus Capital ( AKA - wealthy managers ) can dig into their own pockets to keep Chrysler in the automobile business.
As one member in the House said "the big three have spent 25 years being stupid, why ask the US taxpayers to bail you out?"
As for GM, the firm has negative tangible book value. The UAW and GM management have killed the goose that laid the golden egg. It took 25 years.
As for Ford... Ford's union employees should resign from the UAW, work for less money and take more of an ownership position in their company. Ford's management should also cut their salaries to no more than 1.5 times what a typical worker makes. There should be no bonuses, excessive benefits or golden retirement packages for anyone.
In other words, Let the " no longer the big three " work out their problems themselves.
On October 19, 2006, John W. Snow, President George W. Bush's second United States Secretary of the Treasury, was named chairman of Cerberus. Do you suppose there might be a little incestuous business relationship here?
Simple: sell GM to the UAW
the problem is in denmark they pay $13.00 a gallon for gas and look at amstedam herion needles all over place you cant go to a city park without seeing potheads,hard drug user so i guess if we followed denmarks example this country would be in world of hurt.
In Denmark, a large portion of the high price of gas goes into public transportation. It's a tax the cuts demand for gas and makes them less dependent on foreign oil--essential, since they have none of their own to speak of. Their heroine and other drug problems are highly visible, but no larger than ours. We just do a better job of hiding it.
Our so-called war on drugs has been a joke. So don't pick on Denmark. They have a higher standard of living than we do.
Have you ever actually been there? Because that's just not true. Also, Amsterdam is in Holland, not Denmark.
Let the oil companies bail them out. They've been in cahoots for years.
My second Honda, a 2002, gets 40 mpg on the highway, and it isn't even a hybrid. The service is excellent and respectful, just as it was for my first Honda, a '95. Before that, I had a Plymouth. I made the mistake of taking it to a dealer. They kept it for three days before doing even minor work so they could get a kickback from the rental agency, and then they didn't fix it right. Not only was the car a hunk of junk, but the dealer was a shameless thief. I saw him talking to another guy when he thought I wasn't looking. He thought cheating me was funny. I get follow-up surveys from Honda corporate asking about the dealers. This has been a regular occurance in both California and Colorado. Not only is the car well-engineered, it is also well-supported (at least so far).
Many Hondas are made here in the US. Bad decisions have been made at Ford, GM, and Chrysler. They are still manufacturing those huge gas guzzlers. They're going to make great planters.
This bailout is an offense to American tax payers and all sensible businessmen and women. It is utterly ridiculous because the big 3 have no turnaround plan and will be back for more cash in a quarter. When legitimate, soon-to-be healthy businesses need capital they look to external investment, issue stock, take loans, or issue corporate bonds. But no one will lend to the Big 3 and no one will invest in them because they are all terminally ill!
Having said that, a domestically-owned auto industry is important to national security. Wes Clark and others have made this argument, not just me. Though Big 3 are no longer directly involved in defense work, a vast majority of their suppliers are (suppliers that can't survive on defense work alone). And in a time of crisis (like WWII), the automotive industry can be called upon to convert to making machines of war. I do believe we need at least one American-owned automaker.
So let's choose. Chrysler is privately owned, secretive about their financial health, and by all estimates in the worst shape. Let them die and let Cerberus eat their loss like other investors! Ford seems to be the healthiest of the Big 3, so let's spend our money on them (and buy an ownership stake). GM we can take or leave.
Say what you want about American cars,but say that the 2009 Chevy Malibu is one great engineered car. Especially the 4 cylinder with 6 speed auto transmission. It would only be better if it had a 5 speed manual tranny. It will outlast me, with or without GM.
Forget Chrysler. Fine. Daimler-Benz did. But GM and Ford make a few excellent cars and trucks here in the US and Canada, like the Ford Fusion and Mercury Milan, Cadillac CTS, and they have several quite fuel efficient cars coming soon. They make very good and competitive cars in Europe and Asia like the Opel/Vauxhall, Saab, Volvo, Ford of Europe and Mazda. Cars like the new Ford Fiesta are superb. But during the Clinton and Bush years fuel efficiency standards were overlooked and SUV's proliferated among US, European and Asian makers. Today the parking lots are full of them. Aren't all of us who bought them guilty? From four to ten million jobs in the US are in some way totally dependent on vehicle manufacturing. Do we want to turn a deep recession into a very deep and long-lasting depression, for the equivalent of two and a half months funding of the Iraq war? Isn't that cutting off our nose to spite our face?
Excellent points. But, please do not give one cent to Chrysler LLP, or whatever they are called these days. While you are at the trough, maximum salaries at 150K. Get new management at GM. They need it. I agree that the Malibu is highly rated, but I have never driven one.
I'm completely against any type of government bailout, I find it fascinating that the West Coast and the island of Manhattan supported the bailout of Wall Street financial firms and AIG. Of course the West Coast and the island don’t actually make anything, so it’s likely just elitism and a lack of understanding about the concept of “hard work.”
The Big 3 in the US, an industry that actually makes something as opposed to financial firms that simply redistribute money, are asking for a fraction of the $700billion that the financial firms and AIG are receiving.
Foreign governments are already providing bailout money to their auto companies in the form of government subsidized healthcare plus potential direct bailout money. We’ve seen this before with France/Germany in regards to EADS/Airbus: Government “investment” even when it’s against the rules.
U.S. native automotive firms pay much more in taxes to our federal government, states and cities to supply all of those services that we enjoy: Running water and firefighters to put out fires. They also give to local charities at a much higher rate than foreign automotive firms.
If the U.S. turns completely to service based economy, are we just going to sell pizza and mutual funds to each other?
With all that said, I’m still against a bailout for any company. The continuing Wall Street and AIG mess is a case and point--a huge mistake that we the taxpayers will be footing for many years.
In the end, poor planning on the part of the big 3 does not make for an emergency on the part of the American citizen. Though they want to make it seem like it does. And we are so intrinsically caught up in the consumerism machine that when any part fails, we all suffer greatly.
Detroit has been ignoring the advice of those who had vision for the sake of their own salacious greed as well as that of the oil companies. Advice that would have given them more of a toe-hold in what was then the future (and what is now the present).
The Freidmanites can't in the end have it both ways. Too much government 'interference' in their grand Capitalist plans preventing success, then reaching out to that sworn enemy when their shortsightedness catches them up. They don't want to be regulated or forced to comply with emissions or fuel economy standards, but once everything goes pear shaped for them, then they need to be bailed out.
I say if they get one dime from the government, then they should be forced to comply with every regulation required to bring them in line with a future energy economy that doesn't let big oil hold sway, nor lines the pockets of their execs even as the companies around them, fail.
So end the Wall Street Ponzi scheme now.
Not that I exect it would move you to change your opinions of us, but I'm a citizen of NYC, having lived here for decades, and I was and am totally against the bail-out of capitalism in any of its many forms, very much including the creations of the geniuses of finance. Should you be interested, I left a trail of my displeasure on this subject that you can read through by clicking on "See profile" next to my nom de blog.
However, I don't advocate allowing the big 3 to fail, however bad their products. But that's because I cannot in good conscience promote the job loss for several millions of my fellow citizens just now, when the entire house of cards is burning down around us. I would however, gladly entertain the notion that we might be better off just giving the proposed bail-out money to auto workers, skipping their malfeasant bosses and the shambolic corporations they mismanage altogether.
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