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  • Maritz Research Says Cash For Clunkers Was a Success

    Last summer there were a lot of questions about the effectiveness of the Cash for Clunkers program in which the federal government offered financial incentive for people to turn in their old cars for new, more fuel efficient models. NPR 's Mara Liasson even referred to the program as a "mini-Katrina" for the Obama Administration (she later apologized). Apart from criticisms about how the program was run, there was the concern that the program would simply push people who were going to buy new cars eventually to do so sooner--so that there would not be much long term gain for auto-manufacturers. Now, Maritz Research has released a new report that gives credit to the program for increasing sales beyond expectations. According to CNNMoney 's Peter Valdes-Dapena , Maritz's analysis shows that 765,000 vehicles were sold because of the program: That's more than double the Department of Transportation's estimate of 346,000 sales that wouldn't otherwise have been made. Maritz' estimate of additional new car sales resulting from the program is actually even larger than the total number of vehicles sold under Cash for Clunkers. Government records indicate that a total of 677,000 new vehicles were purchased under the program. According to Maritz, 542,000 of those sales were made to people who didn't plan to buy a car otherwise. Additionally, another 223,000 people were lured into dealerships by the program, learned they didn't qualify for the benefit, but purchased a car anyway. Read Cash for Clunkers: Better than we though here .

  • Carlos Ghosn on Implementing Short Term Responses During Crisis to Set Up Long Term Vision

    Speaking at the Wharton School , Carlos Ghosn , CEO of Renault-Nissan , listed reasons why automakers were hit the hardest--along with banks--by the global economic crisis. They "are big consumer(s) of cash," "big employers," "invest a lot of money," and "have a big supply chain." So the immediate challenge for car manufacturers, Ghosn says, is to get through the crisis. Managing through the crisis depends on maintaining a "positive free cash flow." But the long term survival of these companies depends on long term vision, and, he says, managers have to be careful not to sell out the long term vision in fighting the short term problems. In this video, he outlines Renault-Nissan's approach in responding to the immediate challenges in such a way that the company also moves toward goals for the future. For Renault-Nissan, that appears to mean developing zero emissions vehicles:

  • COP September Report: US Automakers, Government Ownership, and Potential Conflicts

    In its September report, the Congressional Oversight Panel (COP) looks into the impact of the use of TARP funds to keep US automakers Chrysler and GM from going under. The panel looked first at whether Treasury broke any rules in bailing out the companies, and found that the government's behavior was "largely in line with the practices of other large bankruptcies," and that no bankruptcy laws were broken. But there are now added concerns about how the intersection of politics and business puts the government in a tricky situation as part owner of the automakers. And COP, predictably, is calling for more transparency: American taxpayers now own 10 percent and 61 percent of the new Chrysler and GM companies respectively. Treasury's support for the automotive industry differed significantly from its assistance to the banking industry. The bulk of the funds were available only after the companies had filed for bankruptcy, wiping out their old shareholders, cutting their labor costs, reducing their debt obligations and replacing some top management. The government's role raises serious oversight issues, particularly Treasury's conflict between competing objectives. The Panel recommends that, to mitigate the potential conflicts and political issues inherent in owning Chrysler and GM shares, Treasury should take exceptional care to explain its decision making and provide a full, transparent picture of its actions. The Panel also recommends that Treasury consider placing its GM and Chrysler shares in an independent trust that would be insulated from political pressure and government interference. You can read the full report here . Also, COP chair Elizabeth Warren speaks about the September report in this video:

  • GM's Bankruptcy, New Era for Smaller, Innovative Auto Companies

    General Motors is likely to file for Chapter 11 bankruptcy early next week . This might have come as a shock a decade ago, and yet any bad news for the automaking giant raises few eyebrows today. So what is to become of the US automanufacturing business now? In the latest Wired Magazine , Charles Mann suggests we are entering a new age for the industry. One that will reward smaller, innovative companies--much like what happened in the comuter industry three decades ago: If a domestic auto industry is to survive, it will have to incorporate and encourage breakthroughs from outsiders like Transonic. Automakers will need to transition from a vertical, proprietary, hierarchical model to an open, modular, collaborative one, becoming central nodes in an entrepreneurial ecosystem. In other words, the industry will need to undergo much the same wrenching transformation that the US computer business did some three decades ago, when the minicomputer gave way to the personal computer. Whereas minicomputers were restricted to using mainly software and hardware from their makers, PCs used interchangeable elements that could be designed, manufactured, and installed by third parties. Opening the gates to outsiders unleashed a flood of innovation that gave rise to firms like Microsoft, Dell, and Oracle. It destroyed many of the old computer giants—but guaranteed a generation of American leadership in a critical sector of the world economy. It is late in the day, but the same could still happen in the car industry; it just has to harness our national entrepreneurial spirit to develop the next wave of auto breakthroughs. Read Beyond Detroit: On the Road to Recovery, Let the Little Guys Drive here .

  • Blaming an "Uncompetitive Workforce" for Michigan's Economic Struggles

    No state has been hit harder over the past decade than Michigan. David Littman , senior economist for the Mackinac Center , which bills itself as "the largest state-based free-market think tank in the country, has watched the Michigan economy for four decades. And now he says the state needs a "kick in the Bahamas." He predicts unemployment is going to approach 17-20 percent later this year--and he blames "special interests" and labor unions for the state's demise. In this interview, put out by the Mackinac Center, he explains his objection to the way General Motors and Chrysler have worked through the government. His solution to Michigan's struggle? Becoming a "right-to-work" state. The Economic Impact of the Auto Crisis on Michigan from Mackinac Center on Vimeo .

  • Grim Stats for Automakers on Domestic Auto Sales

    Last week was another tough one for US automakers. James Hamilton shows data at Econbrowser that suggests times are not getting better anytime soon, with sales continuing to stagger: There had been some notes of optimism when March sales improved over February, so the dropoff in April was disappointing. But it is the year over year numbers that are striking. Read Hamilton's analysis here .

  • The Pitfalls of Bankruptcy for GM

    Chrysler filed for bankruptcy yesterday . It was a key step in the Obama Administration's efforts to save the automaker by pushing it into an alliance with Fiat. Now General Motors is on the clock. GM has until June 1 to work out a restructuring plan that meets the approval of the federal government, or it too might be filing for bakruptcy . William Holstein is the author of Why GM Matters: Inside the Race to Transform and American Icon , and he thinks bankruptcy would be a disaster for GM and the nation. Holstein says bankruptcy works when you get a number of people to the same table and work out a deal. But in the case of automakers, particularly GM, there are too many parties (all the autoparts manufacturers) to bring together. And, as he told an audience at Columbia Business School, he thinks the government's intervention in General Motors might actually prevent the automaker from making an effective transformation. Watch the full presentation here .

  • Obama Administration on Viability of Automakers' Restructuring Plans

    Chrysler and General Motors submitted viability plans to The White House back in February, and as part of the Treasury Department's agreement with the automakers, the Obama Administration was to give an evaluation of the plans by March 31. The Administration has determined that these plans are not viable. As stated in a report released this morning, "In their current form, they are not sufficient to justify a substantial new investment of taxpayer resources." But, the automakers are not out of time...yet. The Administration is giving them time and capital to work out viable plans. GM gets more time than Chrysler--60 days compared to 30--but will have to operate without CEO Rick Wagoner , who is stepping down at the request of the White House . Chrysler needs to work out a satisfactory partnership with Fiat. From the White House report: • General Motors: While GM’s current plan is not viable, the Administration is confident that with a more fundamental restructuring, GM will emerge from this process as a stronger more competitive business. This process will include leadership changes at GM and an increased effort by the U.S. Treasury and outside advisors to assist with the company’s restructuring effort. Rick Wagoner is stepping aside as Chairman and CEO. In this context, the Administration will provide GM with working capital for 60 days to develop a more aggressive restructuring plan and a credible strategy to implement such a plan. The Administration will stand behind GM’s restructuring effort. • Chrysler: After extensive consultation with financial and industry experts, the administration has reluctantly concluded that Chrysler is not viable as a stand-alone company. However, Chrysler has reached an understanding with Fiat that could be the basis of a path to viability. Fiat is prepared to transfer valuable technology to Chrysler and, after extensive consultation with the Administration, has committed to building new fuel efficient cars and engines in U.S. factories. At the same time, however, there are substantial hurdles to overcome before this deal can become a reality. Therefore, the Administration will provide Chrysler with working capital for 30 days to conclude a definitive agreement with Fiat and secure the support of necessary stakeholders. If successful, the government will consider investing up to the additional $6 billion requested by Chrysler to help this partnership succeed. If an agreement is not reached, the government will not invest any additional taxpayer funds in Chrysler. You can read the full report here . President Obama is expected to speak to the findings in this report later today. He did speak to the Administration's overall view of the automakers' plans and the government's hope to keep GM and Chrysler afloat yesterday on CBS's Face the Nation . Here's an excerpt: Watch CBS Videos Online

  • Detroit's Small Businesses' Efforts to Stay Afloat

    General Motors and Chrysler, as part of the deal for billions of bailout dollars they received, are required to show that they can be profitable. They need to deliver plans for cutting costs today, and then the Obama Administration has 6 weeks to review the plans and decide whether it deems them viable. If not, GM has to return its $13.4 billion, and/or Chrysler its $4 billion check. No state is watching more closely than Michigan, which has been among the hardest hit states by the recession. To shed some light on how the plight of US automakers affects small businesses in Michigan, Small Business at CNNMoney profiled 8 businesses in the Detroit area. It isn;t all bed news. Some of the businesses have found ways to maintain success. Others have established plans to either reinvent themselves or leaned on other area businesses. Read their stories here .