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This article is from our archives and has not been updated and integrated with our "new" site yet... Even so, it's still awesome - so keep reading!

Published on Wed, Dec 3, 2008

By: The LACar Editorial Staff

HOT WIRES For hot and tender news wires on the car culture, see LA Car's Hot Wires Having the Cajones to Say "It's Over" President George W. Bush on the Emergency Aid for Automakers The Straight Facts on the White House Rescue Plan The American Car Companies Have Had Their Chance Don't Believe Emails Slamming Import Brands and Supporting Detroit Letters from Bill: Let's Raise the Gas Tax  



GM's Moraine plant in Ohio closed on December 23, 2008 WRIGHT: BACK SEAT DRIVING BALL AND CHANGE Having the Cajones to Say "It's Over" In Pan-Am Dies, America Lives, New York Times Op-Ed columnist Robert Cohen says, "The whole financial crisis is about the death of responsibility: the buck stopped nowhere. Irresponsibility has also characterized Detroit. I don't see how you restore responsibility with a bailout. Obama has a deeper task than changing the economy; he has to change the culture. The risk of saving the moribund is the demise of the vital - and the long-term cost of that is incalculable." Cohen's thoughts echo a lot of the things that I've been thinking about lately. If we don't change the culture, as he puts it, things have the potential to get really ugly. I remember in the early 1980s when the Swedes, after years of propping up various industries, had their 'Nixon goes to China' moment: The Social Democrats (of all people) told the shipbuilding industry (which had been prominent in Sweden for over 400 years), "You're done, close it up, we're not paying for it anymore." It will be interesting to see if any American politicians have the requisite cojones to do the same with any USA-based industry with a long history, and I'm not just thinking about the auto industry. - Bill Wright    





Employees at GM's Lansing Delta Township facility GEORGE W. BUSH: BACK SEAT DRIVING THE BUCK STOPS HERE President Bush on the Emergency Aid for Automakers For years, America's automakers have faced serious challenges; burdensome costs, shrinking share of the market and declining profits. In recent months, the global financial crisis has made these challenges even more severe. Now, some U.S. auto executives say that their companies are nearing collapse and that the only way they can buy time to restructure is with help from the federal government. It's a difficult situation that involves fundamental questions about the proper role of government. On the one hand, government has the responsibility not to undermine the private enterprise system. On the other hand, government has a responsibility to safeguard the broader health and stability of our economy. Addressing the challenges in the auto industry requires us to balance these two responsibilities. If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers. Under ordinary economic circumstances, I would say this is the price that failed companies must pay. And I would not favor intervening to prevent the automakers from going out of business. But these are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action. The question is how we can best give it a chance to succeed. Some argue the wisest path is to allow the auto companies to reorganize through Chapter 11 provisions of our bankruptcy laws and provide federal loans to keep them operating while they try to restructure under the supervision of a bankruptcy court. But given the current state of the auto industry and the economy, Chapter 11 is unlikely to work for American automakers at this time. American consumers understand why. If you hear that a car company is suddenly going into bankruptcy, you worry that parts and servicing will not be available and you question the value of your warranty. With consumers hesitant to buy new cars from struggling automakers, it would be more difficult for auto companies to recover. Additionally, the financial crisis brought the auto companies to the brink of bankruptcy much faster than they could have anticipated. And they have not made the legal and financial preparations necessary to carry out an orderly bankruptcy proceeding that could lead to a successful restructuring. The convergence of these factors means there is too great a risk that bankruptcy now would lead to a disorderly liquidation of American auto companies. My economic advisers believe that such a collapse would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry. It would worsen a weak job market and exacerbate the financial crisis. It could send our suffering economy into a deeper and longer recession. And it would leave the next president to confront the demise of a major American industry in his first days of office. The more responsible option is to give the auto companies an incentive to restructure outside of bankruptcy and a brief window in which to do it. And that is why my administration worked with Congress on a bill to provide automakers with loans to stave off bankruptcy while they develop plans for viability. This legislation earned bipartisan support from majorities in both houses of Congress. Unfortunately, despite extensive debate and agreement that we should prevent disorderly bankruptcies in the American auto industry, Congress was unable to get a bill to my desk before adjourning this year. This means the only way to avoid a collapse of the U.S. auto industry is for the executive branch to step in. The American people want the auto companies to succeed and so do I. So today I'm announcing that the federal government will grant loans to all the companies under conditions similar to those Congress considered last week. These loans will provide help in two ways. First, they will give automakers three months to put in place plans to restructure into viable companies which we believe they are capable of doing. Second, if restructuring cannot be accomplished outside of bankruptcy, the loans will provide time for companies to make the legal and financial preparations necessary for an orderly Chapter 11 process that offers a better prospect of long-term success and gives consumer confidence that they can continue to buy American cars. Because Congress failed to make funds available for these loans, the plan I'm announcing today will be drawn from the financial rescue package Congress approved earlier this fall. The terms of the loans will require auto companies to demonstrate how they would become viable. They must pay back all their loans to the government and show that their firms can earn a profit and achieve a positive net worth. This restructuring will require meaningful concessions from all involved in the auto industry - management, labor unions, creditors, bond holders, dealers, and suppliers. In particular, automakers must meet conditions that experts agree are necessary for long-term viability, including putting their retirement plans on a sustainable footing, persuading bond holders to convert their debt into capital that companies need to address immediate financial shortfalls, and making their compensation competitive with foreign automakers who have major operations in the United States. If a company fails to come up with a viable plan by March 31st, it would be required to repay its federal loans. The automakers and unions must understand what is at stake and make hard decisions necessary to reform. These conditions send a clear message to everyone involved in the future of American automakers. The time to make hard decisions to become viable is now. Or the only option will be bankruptcy. The actions I'm announcing today represent a step that we wish were not necessary. But given the situation, it is the most effective and responsible way to address this challenge facing our nation. By giving the auto companies a chance to restructure, we will shield the American people from a harsh economic blow at a vulnerable time and we will give American workers an opportunity to show the world, once again, they can meet challenges with ingenuity and determination and bounce back from tough times and emerge stronger than before. Thank you. George W. Bush December 19, 2008    





NAKANO: BACK SEAT DRIVING The December 19, 2008 - President Bush announced that the Treasury Department will make loans available from the Troubled Asset Relief Program (TARP) to assist the domestic auto industry in becoming financially viable. The terms and conditions of this financing will facilitate the restructuring of our domestic auto industry, prevent disorderly bankruptcies during a time of economic difficulty, and protect the taxpayer by ensuring that only financially viable firms receive assistance. These auto manufacturers will be provided with $13.4 billion in short-term financing from the TARP. An additional $4 billion would be made available in February, contingent upon drawing down the final tranche of TARP funds. The firms must use these funds to become financially viable. "Taxpayers will not be asked to provide financing for firms that do not become viable," said President Bush. "In the event that firms have not attained viability by March 31, 2009, the loan will be called and all funds returned to the Treasury Department." A firm will only be considered viable if it has a positive net present value, taking into account all current and future costs, and can fully repay the government loan. Terms And Conditions The binding terms and conditions established by the Treasury will mirror those that were supported by a majority of both houses of Congress, including:

  • Firms must provide warrants for non-voting stock.
  • Firms must accept limits on executive compensation and eliminate perks such as corporate jets.
  • Debt owed to the government would be senior to other debts, to the extent permitted by law.
  • Firms must allow the government to examine their books and records.
  • Firms must report and the government has the power to block any large transactions (more than $100 million).
  • Firms must comply with applicable Federal fuel efficiency and emissions requirements.
  • Firms must not issue new dividends while they owe government debt.

The terms and conditions established by Treasury will include additional targets that were the subject of Congressional negotiations but did not come to a vote, including:

  • Reduce unsecured debt by two-thirds via a debt for equity exchange.
  • Make one-half of Voluntary Employee Beneficiary Association (VEBA) payments in the form of stock.
  • Eliminate the jobs bank.
  • Work rules that are competitive with transplant auto manufacturers by December 31, 2009.
  • Wages that are competitive with those of transplant auto manufacturers by December 31, 2009.

These terms and conditions would be non-binding in the sense that negotiations can deviate from the quantitative targets above, providing that the firm reports the reasons for these deviations and makes the business case that it will achieve long-term viability in spite of the deviations. In addition, the firm will be required to conclude new agreements with its other major stakeholders, including dealers and suppliers, by March 31, 2009. Effects Of A Domestic Auto Industry Failure "During this very critical time for the global economy, the impact of a disorderly bankruptcy would be very damaging to our manufacturing base, affecting jobs well beyond the auto industry," said President Bush. "The additional job losses and loss from Gross Domestic Product (GDP) would likely postpone our economic recovery considerably. In addition, these effects could multiply and result in additional declines in investment, consumption, and growth, which could worsen the current recession." The White House issued the following statement: "The direct costs of American automakers failing and laying off their workers in the near term would result in a more than one-percent reduction in real GDP growth and about 1.1 million workers losing their jobs, including workers from auto suppliers and dealers. Many workers would apply for unemployment benefits, and to the extent that retirees and other workers lost health insurance, apply for Medicaid. These new unemployment claims could cost about $13 billion and would likely add sizeable costs to State Medicaid programs. Additionally, suppliers may not be able to absorb losses from writing off the accounts payable owed by auto manufacturers and may not be able to downsize quickly, resulting in remaining auto companies having supply chains disrupted. These effects on our economy could multiply as a result of the failure of these companies."      





Your Dodge dealer will gladly sell you this Challenger, for a price...

KENNEDY: BACK SEAT DRIVING THE AMERICAN CAR COMPANIES HAVE HAD THEIR CHANCE An Open Letter to Congress Re: The auto bailout I'm as much a sympathizer as anyone regarding the plight of the US auto industry. I like American cars, at least the ones that offer rear-wheel drive technology, and the only new car I ever bought was a US model, a 2000 Mustang GT which continues to serve me well. I recently went to the LA Auto Show on a press credential, and I spent my day there scoping out the newest US-label models. I even wrote an article complimenting GM, Ford, and Chrysler for finally offering some product that people want to buy. So you might say that I, of all people, am in the corner of the US auto companies. But this morning, I went by my local Chrysler dealer, and I saw there all the proof I need that the US auto industry doesn't need my tax money to help it out. The dealer had three very desirable models front and center on the lot - the new Dodge Challenger. The cars were two of the mid-range Hemi models and one big bruiser SRT8 Hemi. I don't need a car right now. And yet, I thought, why not have a look? I could afford to buy one if I stretched a bit, and doing so would help the economy. Maybe this was just self-talk, an excuse to make an extravagant purchase. But would the dealer care? No. Would I be able to make the payments? Well, I wouldn't sign for the car if I couldn't. Have I ever bought a Chrysler product before? Just my 1975 Dart Sport, which I owned ten years and 70,000 miles after it rolled out of the showroom. And up until just recently, I had never even considered another Mopar product. But this Challenger. Yum. I walked close, then closer. I saw the first car. Nice. Around thirty-seven grand. A lot. But look what you're getting! The second one was the full-boat Hemi. And I noticed that it had two stickers. The normal one, and one written in marker. "Market Value Adjustment" it said. And it gave a number. $10,000. I looked back at the first car, and noticed what I had missed before. It too had a "Market Value Adjustment" demand of ten grand. Wow. What's the message here, I wonder? The way I read it is perhaps simplistic, but here goes. They finally build a car people might want, price it fair but not cheap, and then the dealer puts it out of range of anyone on a regular income. Thirty-seven thou - do-able. Nearly fifty? Ridiculous. So let me say, Mr. and Ms. Congressional Representative - these people do not need your help. They need a basic lesson in economics. They need to balance (finally) producing a good product with a little commonsense and a little less greed. Forget that. What they need is a smackdown. And if that means that a Japanese-label company takes their market share, well, why should they complain when they aren't willing to sell their cars for what they're stickered at? Now before you say it that there are flaws to my argument, I know that the company doesn't control what dealers ask for their cars. I know that Japanese-label companies overcharge sometimes too (though it's American car companies that are famous for it). And I understand that it's a capitalist world, and they should be able to sell the car for whatever they wish. True, true, and true. But at the least, can't anyone admit that, in a time when the companies want help because they can't sell cars, this kind of move is entirely distasteful, greedy, and wrong? I can tell you something else that I know is true. I won't be pumping thirty-seven grand into the economy this Christmas by making an impulsive new-car purchase. And I sure as hell won't be giving a dealer ten grand just because he's the only one on the auto row with a new Challenger. In fact, the Mazda dealer next door had a pretty clean looking Miata for under twelve grand. Hmm. If I do a decent deal over there, I can get that car for free - or at least, for just a little bit more than I'll save by not playing the Chrysler dealer's greedy game. So as the hearings progress and the whining continues, please remember this, dear government official: The American car companies have had their chance. And they're the ones who have failed to deliver good product. Now that they've finally succeeded on that score, however, they've forgotten how to move stuff out the door without angering their customers. And that's not your fault or mine. It's theirs. Sincerely, Brian Kennedy    





UAW Local 588 members smash a Toyota Corolla, March 3, 1981 (AP)

DAPOZ: BACK SEAT DRIVING LIES, DAMNED LIES, AND LIES ABOUT THE DETROIT THREE Don't Believe Emails Slamming Import Brands and Supporting Detroit     Mark Twain said, "There are three kinds of lies: lies, damned lies and statistics." If Twain were alive today, he might quip, "There are lies, damned lies and lies about the Detroit Three." General Motors, Ford and Chrysler are financial basket cases, but the hyperbole out of Detroit in support of the hometown companies has gone past exaggeration and into falsehood. For a few weeks, we've been hearing that three million auto-related jobs could disappear if the Detroit Three went out of business. Friday, that number suddenly jumped to six million jobs, according to The Engine of Democracy, whoever that is. Coincidentally, on Friday I received an email with the subject of "Ford, Chrysler and GM's contributions after 9/11....." It was a note that had been forwarded many times. It started:

Please pass this along to friends/family/co-workers and out of state contacts if applicable. We need to remind the east coast/DC political idiots that Detroit stepped up on 9/11 to lend a helping hand without any request or prompting. Not that it matters to ingrates like Bawney Fwank at this point...

It went on to say that after 9/11 - supposedly according to CNN - GM Ford and DaimlerChrysler each contributed $10 million to the Red Cross, NYFD and related causes. The email then listed what it said were contributions made by non-U.S. auto companies (this is verbatim from the email):

Audi- Nothing. BMW- Nothing. Daewoo- Nothing. Fiat- Nothing. Honda- Nothing despite boasting of second best sales month ever in August 2001 Isuzu- Nothing. Mitsubishi- Nothing. Nissan- Nothing. Porsche-Nothing. Press release with condolences via the Porsche website. Subaru- Nothing. Suzuki- Nothing. Toyota-Nothing despite claims of high sales in July and August 2001. Condolences posted on the website Whenever the time may be for you to purchase or lease a new vehicle, keep this information in mind. You might want to give more consideration to a car manufactured by an American- owned and / or American based company. Apart from Hyundai and Volkswagen, the foreign car companies contributed nothing at all to the citizens of the United States ... It's OK for these companies to take money out of this country, but it is apparently not acceptable to return some in a time of crisis. I believe we should not forget things like this. Say thank you in a way that gets their attention.

The email had the credibility of an anonymous bank official in Nigeria promising millions of dollars for help getting money out of the country. Who believes this crap? Who forwards it? The sender of the email works at General Motors ( address). The distribution list included someone at Ford; also someone working for the city of Flint. I checked Snopes, a site that catalogs and corrects online rumors and misinformation, and it said the statistics in the email were fabricated. Take a look: The Snopes page lists the actual contributions of the non-U.S. automotive brands to 9/11-related causes: · Audi: $100,000 · BMW: $1 million cash plus 10 new X5s to the Red Cross and 100 motorcycles to the NYPD · Honda: $1.5 million · Mitsubishi: $200,000 · Nissan: $1 million · Subaru: $1 million · Toyota: $1 million · VW: $2 million Snopes also corrects the donation figures for the Detroit Three: · GM: $1 million · Ford: $1 million · DaimlerChrysler: $10 million In sum, the non-US companies made noteworthy contributions after 9/11 causes - and donated more than the Detroit-based companies. (At the time, DaimlerChrysler was German-owned.) It seems facts don't matter to a lot of people in Detroit right now. The rallying cry: "Survival at all cost! The ends justify the means!" Maybe that's overly harsh. But if you must lie to rally support for your cause, that indicates something's wrong with your cause. Or with you. It's a shame the defense of Detroit has come to this. - Chuck Dapoz    





Ye Exec Ed says his English Ford is the most unreliable car he's ever owned

BACK SEAT DRIVING: LETTERS FROM BILL READ MY LIPS Let's Raise The Gas Tax     Dear Friends, Back to an old favorite of mine: Let's raise the gas tax - A LOT. Then, we don't have to worry about CAFE (Corporate Average Fuel Economy) standards, or any other spurious twist to the workings of the Market. Maybe we can use the money to upgrade our roads, bridges, and infrastructure (hey, all the good buzz words). I am aware that the poorest get hit hardest (initially). There can be transfer systems for that, maybe we can allow the use of food stamps for fuel (gas stamps?). Politicians in general, and certain ones in particular have this inability to allow the word 'tax' to cross their lips. But, hey, more than a trillion dollars in deficit spending is evidently okay. You know, we almost (close, but no cigar) instituted a system of increasing MPG through gas taxes during the 1973-1974 oil crisis. President Ford (a Republican, from Michigan, no less) really liked the idea, but the Congress, led by the usual suspects from MI, IL, OH went apoplectic. The United Auto Workers union and The Big Three (still big back then) knew that at that time, the only small cars to be had were from Japan and Europe (granted, at that time, a number of the Euro offerings were garbage, but the MPG figures were good). The Big Three collectively argued that given time, "we can do it ..." (Now class, can you say Pinto?) 35 years later, a whole lot of time has passed, and here we are. Hugsabunch, Bill Wright    





LA Car

That was LA Car's subtitle when it started back in 1997. It's original website address was about five times the size of Since then, La Car became LA Car. Its subtitle became Reporting From Car Culture Ground Zero, then From The Heart of Car Culture, to today's The Cars and Culture of Southern California. At all times, however, we aimed to chronicle the Southland's automotive spirit - much like one's own journal or diary. LA Car has always been a great source to come back to from week-to-week, to see what articles and reviews have been added to our rather staggering database. With Back Seat Driving, a.k.a. BSD (note the similarity to two well-worn abbreviations, BS and BFD) and Hot Wires - Hot & Tender News From the Car Culture (co-located with Back Seat Driving, and updated at least daily), we give you some reasons to come back more often (all opinions, by the way, are those of the respective author). So, go ahead and bookmark We'll be sure to always provide a link to Hot Wires and the latest Back Seat Driving blog entry. In the meantime, welcome to the journal and journey from the heart of the car culture. - Roy Nakano 

For past Blog entries, click the following: November 2008 October 2008 September 2008 August 2008 July 2008 June 2008 May 2008 April 2008 March 2008 February 2008 January 2008 December 2007 November 2007 October 2007 September 2007 August 2007 July 2007 June 2007 May 2007 April 2007 March 2007 February 2007 January 2007 December 2006 November 2006 October 2006 September 2006 August 2006 July 2006 June 2006 May 2006 April 2006 March 2006 February 2006 January 2006 December 2005 November 2005 October 2005 September 2005 August 2005 July 2005 June 2005 May 2005 April 2005 March 2005 February 2005 January 2005 December 2004 November 2004 October 2004 September 2004 August 2004 July 2004 June 2004 May 2004 April 2004

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