The Washington Postmakes clear just how gingerly the UAW was treated in the GM nationalization plan:
At a time when some American workers are facing stiff pay cuts, UAW workers gave up their customary paid holiday on Easter Monday and their right to overtime pay after less than 40 hours per week. They still get health benefits that are far better than those received by many American families upon whose tax money GM jobs now depend. Ditto for UAW hourly wages, though according to the task force, GM’s labor costs are now within “shooting distance” of those at nonunion plants run by Honda, Toyota and other foreign firms. Cumbersome UAW work rules have only been tweaked.
Also worrisome was the strong-arming of the company’s bondholders, who got far less equity in return for their money than the UAW, the president’s political ally. The administration wants to spin GM back to the private sector as soon as possible. But private investors may have been durably scared by the union’s display of clout. Indeed, the UAW boasted to its members that it blocked a plan to build GM cars in China and “negotiated new opportunities for UAW involvement in future business decisions.”
So when the president says he will be a hands-off manager, think again. One can’t believe that a bankruptcy court or a truly independent management team would have preserved the UAW’s standing to the degree to which the Obama administration did. This will, of course, make it that much more difficult for GM to regain its competitiveness. And it will once again leave the shareholders — that would be all of us taxpayers — holding the bag and likely to be hit up for still more subsidies.
We are led to believe that all of this is about saving jobs. But let’s get real. It hasn’t saved the car dealership jobs. And for $50B we could have sent all of GM’s workers back to school and set them up in training programs at companies with a future. No, this is about certain types of jobs — UAW jobs — and about rescuing a stalwart political ally.
Big Labor has gotten its money’s worth (hundreds of millions in campaign donations was able to snare billions from the federal government to keep the UAW afloat). The taxpayers? Not so much.
By INVESTOR'S BUSINESS DAILY | Posted Tuesday, June 09, 2009 4:20 PM PT
Economy: More than 1.6 million jobs have disappeared since the stimulus package was signed in February. Government can't create jobs, only dependency. Make-work jobs will not turn the economy around.
The Obama administration, totally unfamiliar with the first rule of holes, has announced it's about to really, really ramp up stimulus spending to create 600,000 jobs this summer. That's on top of the 150,000 jobs it has "saved," though there's no way to identify or measure such jobs.
The unemployment rate, which was never supposed to rise above 8% because of the stimulus, is now approaching 10%. The excuse given is that not enough of the stimulus money has been dispersed.
Monday's announcement of a new and improved stimulus is just old wine in new bottles. In the first 100 days of the stimulus, some $44 billion was spent as jobs continued to hemorrhage. Now we're asked to do more of the same and expect different results.
Obama's 600,000 figure includes 125,000 temporary summer youth jobs and is based on economic projections, not an actual count. The only thing you can accurately count is the number of Americans working — and that's going down fast.
The administration is playing a shell game with its "saved or created" job claims. Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, said as much to the tax-challenged Timothy Geithner at a March hearing.
"You created a situation where you cannot be wrong," Baucus told Geithner. "If the economy loses 2 million jobs over the next few years, you can say yes, but it would've lost 5.5 million jobs."
We need only see how the Obama administration has mucked up the U.S. auto industry. If the administration wanted to save jobs, what about the car dealerships forced to close by Government Motors? What about the car salesmen and auto mechanics?
We could have just let GM and Chrysler go bankrupt. We were told they were too big to fail, that the job loss would devastate the economy. Yet how was it that after 9/11 we continued to fly bankrupt airlines that stayed in business till they got back on their feet?
Cars could have continued to be built and sold and dealers would have continued. But union contracts would have been voided by a bankruptcy judge. A key Democratic constituency would have been ticked off. Better to wait until tens of billions were squandered and the car companies had no choice but to sell themselves to the government and the unions. One hastened their demise with burdensome regulations, the other with horrendous legacy costs.
This is no way to run a railroad. And speaking of railroads, the U.S. car industry is about to be run by the people who gave us Amtrak, which loses so much money per passenger on some routes that it would be cheaper to buy them plane tickets. All this gives a new meaning to the phrase: Would you buy a used car from this man?
The way to create jobs is to do the things that actually work. Let people and businesses keep more of what they earn. Applaud profit as a reward for success and efficiency. Let the risk takers take the risks and reap the rewards. And when they fail, well, let them fail.
I’ve finally figured out the Obama economic strategy. President Barack Obama and his team have been having so much fun wielding dictatorial power while rescuing “failed” firms, that they have developed a scheme to gain the same power over every business. The plan is to enact policies that are so anticompetitive that every firm needs a bailout.
Once that happens, their new pay czar Kenneth Feinberg can set the wage for everybody and Rahm Emanuel can stack the boards of all of our companies with his political cronies.
I know, it sounds like an exaggeration. But look at it this way. If there were a power ranking of U.S. companies, like the ones compiled by football writers for National Football League teams, Microsoft would surely be first or second to Google. But last week, Microsoft Chief Executive Officer Steve Ballmer came to Washington to announce what Microsoft would do if Obama’s multinational tax policy is enacted.
“It makes U.S. jobs more expensive,” Ballmer said, “We’re better off taking lots of people and moving them out of the U.S.” If Microsoft, perhaps our most competitive company, has to abandon the U.S. in order to continue to thrive, who exactly is going to stay?
At issue is Obama’s policy to end the deferral of multinational taxation.
The U.S. now has about the highest combined corporate tax rate, second only to Japan among industrialized countries. That rate is so high that U.S. firms have an enormous disadvantage versus competitors. The average corporate tax rate for the major developed countries in the Organization for Economic Cooperation and Development in 2008 was about 27 percent, more than 10 percentage points lower than the U.S. rate.
Tax Burden
U.S. firms have nonetheless prospered because our tax code allows a business to set up a subsidiary in a low-tax country. When that subsidiary earns profits, they are taxed at the rate of that country, and don’t face U.S. tax until the money is mailed home.
The economically illiterate partisan Democratic view is that this practice is unpatriotic and bleeds jobs from the U.S. The economic reality is that American companies use this approach to acquire market share overseas. The alternative is losing the business to foreign competitors.
Don’t just take my word for it. A recent paper by Harvard economists Mihir Desai and C. Fritz Foley and Berkeley economist James Hines and published in the distinguished American Economic Review, gathered data on American multinationals to explore the impact of foreign investments on domestic U.S. activity.
Encourage Overseas Sales
Their conclusion was striking. The authors found that “10 percent greater foreign capital investment is associated with 2.2 percent greater domestic investment, and that 10 percent greater foreign employee compensation is associated with 4 percent greater domestic employee compensation. Changes in foreign and domestic sales, assets, and numbers of employees are likewise positively associated; the evidence also indicates that greater foreign investment is associated with additional domestic exports and R&D spending.”
So when firms expand their operations abroad, taking advantage of the lower foreign tax rates, it helps their workers in the U.S. Higher sales abroad (surprise, surprise) are good for domestic workers.
It is worth noting that this study, which is confirmed by a boatload of evidence elsewhere, was coauthored by the same James Hines who recently wrote a sweeping review of international tax policy with Obama’s top economist, Larry Summers. Summers has to know what the literature says.
Inexplicable Stance
So the question is, why does Obama advocate a policy that so flies in the face of everything that economists have learned? How could Obama possibly say, as he did last month, that he wants “to see our companies remain the most competitive in the world. But the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens?” Further, how could Treasury Secretary Tim Geithner call a practice that top scholarship has shown increases wages and employment in the U.S. “indefensible?”
I have to admit I am at a loss. Maybe it is good politics to bash American corporations, and Obama isn’t really serious about making this change happen. But if the change is enacted, and domestic corporate taxes aren’t reduced to offset the big tax hike, the result will be a flight from the U.S. that rivals in scale the greatest avian arctic migrations.
If that occurs, the firms that stay in the U.S. will be at such a huge tax disadvantage that they will absolutely need a “rescue.”
(Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He was an adviser to Republican Senator John McCain of Arizona in the 2008 presidential election. The opinions expressed are his own.)
WASHINGTON -- The Obama administration rushed an alliance between Chrysler LLC and Fiat SpA despite Chrysler's worries about Fiat's financial health and its willingness to share technology, according to internal company emails.
The emails show Fiat ignoring requests for documents and trying to change contract terms late in the talks. A Chrysler adviser at one point said the deal risked looking as if the U.S. auto maker and the Treasury Department, which helped broker the pact, were "in bed with a shady partner." In another note, an official referred to the Treasury Department as "God."
Emails about the Chrysler-Fiat deal reveal tense debate and last-minute attempts at negotiation just hours before Chrysler filed for bankruptcy. In one email, above, a top Chrysler financial adviser tried for new contract terms with a head lawyer for Treasury, who swiftly declined.
The documents, filed in the Southern District of New York as part of Chrysler's bankruptcy proceedings, provide a glimpse at the tense debates that shaped Chrysler's final days as it raced to find a suitor.
On Friday, a federal appeals court upheld Chrysler's Fiat deal, dismissing a challenge by dissident Chrysler debt holders. But the court also issued a stay until 4 p.m. Monday -- leaving a small window for Thomas Lauria, the lawyer pursuing the case, to appeal to the Supreme Court. One judge on the three-judge panel suggested the Supreme Court should have "a swing at this ball."
Mr. Lauria's persistence led one government lawyer in the Chrysler case to dub him a "terrorist" in an email to a Chrysler adviser.
In a written statement, Chrysler said "comments extracted from emails exchanged in the heat of negotiations reflect the normal hyperbole that occurs in the final stages of negotiating any complex transaction." Chrysler said its concerns about the deal were answered.
Fiat said it "provided full access to all information relevant to the due-diligence exercise performed by Chrysler and the prospective lenders."
The revelations come as the Obama administration is rushing to get a bankruptcy court to sign off on the Chrysler-Fiat merger as early as next week. Fiat has the right to walk away from the deal if it isn't consummated by June 15.
Related Documents
March 10: Chrysler Chairman and Chief Executive Officer Robert Nardelli writes a letter to the U.S. Treasury laying out his thoughts and concerns about a potential Fiat merger.
March 17: Chrysler advisor Robert Manzo passes along an email noting how the Treasury team seems to know little about Chapter 11.
March 25: Chrysler top brass discuss how the company will definitely go into Chapter 11.
March 27: Chrysler's advisers report that they have too little financial information to determine Fiat's viability.
April 4: Treasury's Ron Bloom chastises Chrysler's Nardelli for negotiating with Daimler.
April 14: Manzo urges all sides to reconsider a Chrysler alliance with General Motors.
April 22: Chrysler top officials are told that Fiat is still refusing to turn over key financial information, demanding they make a "written request."
April 23: Treasury's bankruptcy lawyer, Matthew Feldman, acknowledges that Fiat is holding out on a promised technology deal.
April 30: Manzo tells Chrysler President Tom LaSorda that for Treasury, "We are the gueni pigs unfortunately."
Chrysler filed for bankruptcy protection April 30 armed with $12 billion from the government. Earlier this week, the government ushered General Motors Corp. into what it hopes also will be a speedy bankruptcy.
In an interview, an administration official said any concerns about Fiat were resolved in the final week. The Italian company gave Chrysler and the U.S. "total access to technology" and revealed enough about its financial status to persuade the U.S. the company was not just stable, but strong, the official said.
The official called the negotiations "a high-wire act" in which a small team of government advisers had to quickly pull together a complicated deal. In such situations, "people speak in elevated tones," the official said. "People get threatening."
The emails, which run from mid-March until early May, were put into the court record following a request by Mr. Lauria, the lawyer fighting the bankruptcy on behalf of various Indiana pension and investment funds that hold Chrysler bank debt. They argue that the case has trampled on established bankruptcy law.
In early March, both Chrysler and the government seemed unsure about Fiat. In a March 10 letter to the Treasury auto team, Chrysler Chief Executive Robert Nardelli said he shared some of the government's worries about a Fiat alliance, including that the introduction of Fiat in the U.S. "may have a negative impact" on General Motors and Ford.
Mr. Nardelli also noted how Treasury officials had complained Fiat was "not bringing enough to the table" and had to be forced to put up cash for an equity stake.
A Chrysler spokeswoman said Mr. Nardelli wouldn't comment beyond his affidavit. In the affidavit, he said that by April's end, "Chrysler's management became comfortable with entrusting our precious assets to Fiat."
Chrysler's advisers told the company their Italian counterparts were refusing to provide sufficient financial information to evaluate the deal. A team sent to Fiat headquarters in Turin, Italy, reported back on March 14 that "no financial due diligence ... has or can be performed."
Getty Images
Robert Nardelli, chairman and CEO, Chrysler
Associated Press
Tom LaSorda, vice chairman, former President, Chrysler
Associated Press
Ron Kolka, CFO, Chrysler
Associated Press
Ron Bloom, senior adviser to Timothy Geithner
Bloomberg News
Matthew Feldman, member of the Obama auto team
An internal memo 13 days later from Chrysler's advisory team also said Fiat's "off-balance-sheet investments" in joint ventures around the world posed an economic risk and a political risk," including the appearance that "Treasury/Chrysler" was "in bed with a shady partner."
Eight days before President Barack Obama announced his support for the alliance in an April 30 speech, Chrysler officials were still bristling over what they considered Fiat's unwillingness to provide even basic information about its finances. "They requested us to re-submit a written request" for the information, one Chrysler official wrote on April 22 to Mr. Nardelli, the CEO.
Treasury officials, meanwhile, worried about Fiat's willingness to share technology with Chrysler, one of the deal's underpinnings. Fiat stands to get an initial 35% stake in Chrysler, and potentially 50%, based on its ability to help upgrade Chrysler's technology. Fiat is putting in no cash.
On April 22, Mr. Manzo of Capstone, the Chrysler adviser, sent a note -- like some of the emails, containing misspellings -- to Matthew Feldman, a member of the Obama auto team, to complain that Fiat "is trying to be squirely" about sharing technology.
Mr. Feldman emailed back: "We know."
Mr. Feldman declined to comment on the emails.
At the outset, the Chrysler team appeared leery of the role being played by the Treasury, which was leading the effort to save the auto maker. "I think we are clearly getting more cooks in the kitchen," Mr. Nardelli said in an email.
However, Chrysler quickly learned to defer to the Treasury team. In one email chain, Ron Bloom of the Treasury chastised a Chrysler official for trying to hammer out some lingering issues with Daimler, Chrysler's former partner, without looping in the Treasury.
"I am more than a little surprised," Mr. Bloom wrote, that Chrysler was proceeding "without our approval."
Mr. Nardelli jumped in: "Ron, thought we were helping, how would you like to handle!"
Later, the Chrysler executives deleted Mr. Bloom from the address line, and continued talking. "I guess the UST is running it!" said Mr. Nardelli, referring to the Treasury.
"26 days and counting," said Tom LaSorda, Chrysler's then-president, referring to the April 30 deadline to either do a deal or file for bankruptcy.
"Amen!" responded Mr. Nardelli.
Mr. LaSorda didn't return calls seeking comment.
Despite the push to do a deal with Fiat, Chrysler advisers continued into April urging the Treasury to think again about a potential merger with GM. Earlier talks between the two auto giants had broken down in November, and the Obama administration put little stock in the idea.
On April 10, Mr. Manzo emailed Mr. Nardelli to say he told the Treasury to reconsider a GM pair-up. Four days later, Mr. Manzo sent an email to several Treasury officials, as well as Messrs. Nardelli and LaSorda, urging them to reconsider.
"We continue to believe that revisiting the combination/alliance discussion with gm from the fall is the best alternative for all parties," he said.
In an interview, Mr. Manzo said conflicts will happen when a company like Chrysler is asking for money from a lender, particularly the government. He also said the emails reflected his "fiduciary duty to get the best value" for Chrysler.
Just before the filing, tensions boiled over. Mr. Manzo offered a suggestion to Mr. Feldman about making a last-minute offer to Chrysler's debt holders. "I'm now not talking to you," Mr. Feldman wrote back.
The next morning, hours before President Obama announced the bankruptcy, Chrysler President Mr. LaSorda emailed Mr. Manzo asking if Chapter 11 filing was inevitable.
"Not good," Mr. Manzo replied. "These washington guys want to show the market (gm, delphi....) that they can be tuff. We are the gueni pigs unfortunately."
—Alex Kellogg, Stacy Meichtry and Jake Seward contributed to this article.
Do you want to know the trick to financial prosperity? Spend less than you make.
That's it. That's really it. Class dismissed.
Yet so many dismiss that; that it's better to have more money coming in than going out.
Yet so many folks forget that. Companies too.
Companies like General Motors.
Because you know what number tells you all you need to know about GM? This one: $172.8 billion. That's the company's total debt — what GM owes.
Now another number: $82.29 billion. That's the company's total assets — what GM has.
Put another way, GM owes a lot more than it has. It has more bills it must pay than bills to pay them.
Think about that. GM is that upside down. It owes more than twice what it has.
It's not alone.
Where it is kind of alone, is that unlike a lot of folks in similar situations, in this situation, the government came to the rescue and put more money in, so GM can dig itself out.
The United States and the Western world must learn about Islam, and indeed if we count the number of American Muslims, we see that the United States is one of the largest Muslim countries on the planet," he said. Interview with French Le Monde. (hat tip Boquisucio):
As Obama embarks on his much lauded (compliments of a dhimmi press) trip to address the Muslim world from Egypt (where 95% of the women/girls have had their clitorises cut off), select members of the mainstream media are surprised by Obama's pre-election deceit about his Muslim background and family.
When I started posting about Obama's religious Muslim background in January of 2007, every epithet was hurled at me from the left and mainstream circles. Islamophobe! Right wing nut! Racist? What race? He is really more Arab American than African American, but the racist charge was for his religion (Islam is a race?).
That said, Barack Obama went to a madrassa in Jakarta. A madrassa in a Muslim country. Whether he was devout or secular, he knows what was taught. He knows what is in the Koran. Even if he is ambiguous, he knows the stakes involved. His father was a Muslim who took three wives (without divorcing). His stepfather and close members of his family are devout Muslims. Not an unimportant influence.
Every Muslim who left Islam is very definitive about leaving and why. They are quite vocal - Wafa Sultan , Ayaan Hirsi Ali, Walid Shoebat, Elijah Abraham, etc. If he left Islam, Obama must have very definite thoughts about it. He has to, he practiced Islam. That is not benign; it's big. And even if, as inferred by big media, it was not big to him, then he can still appreciate how important it is knowing what he knows about Islam and apostasy.
Obama would have had to make a decision to reject Islam. When did he make that decision? How? Why the silence? Why the reluctance to talk about it?
I am not a racist. Tough to prove a negative. But I refuse to dhimmi down and STFU. Too much is wrong. Obama's narrative is being altered, enhanced and manipulated to whitewash troubling facts. The web is being scrubbed of Obama's ties to Islam. But America will know the truth, even if the mainstream media refuses to touch the third rail. The media is already in full spin mode. The racist charge is fallacious - Islam is not a race, but why split hairs, right?
America should be skeptical. America should question - intensely. We are in the fight for our lives against an enemy who has vowed to destroy us. Good faith is not good enough.
My objective is to unearth Obama's relationship to Islam. Islam is a political ideology and it is incompatible with democracy.
Mosques are being used to electioneer for Obama. Arabs and Muslims in Islamic countries endorse Obama. Unindicted co-conspirator and Hamas sympathizer CAIR endorses him. Why would they endorse an apostate? There is no record of Obama ever having been baptized. Did he leave Islam and become Christian?
It was taboo. I was "fear mongering". When Obama's Islam was discussed, it was romanticized. When he told Nicholas Kristof of the NY Times "the prettiest sound he [Obama] ever heard was the Muslim call to prayer at sunset," it was the epitome of multicultural tolerance, despite the barbaric intolerance of Islam.
When his anti-semitic, anti-American pastor Reverend Jeremiah Wright was exposed as a member of the haters, the Nation of Islam, prior to his leadership of his Black Liberation church, the mainstream media yawned. Obama was never vetted, his lies never exposed. And so we have our first Muslim presidency, fresh on the heels of 911. The motor of this presidency is submission to Islam and the conversion to a communist economy.
Today Jake Tapper over at ABC News broke the mainstream media taboo and actually stated the obvious.
The other day we heard a comment from a White House aide that never would have been uttered during the primaries or general election campaign.
During a conference call in preparation for President Obama's trip to Cairo, Egypt, where he will address the Muslim world, deputy National Security Adviser for Strategic Communications Denis McDonough said "the President himself experienced Islam on three continents before he was able to -- or before he's been able to visit, really, the heart of the Islamic world -- you know, growing up in Indonesia, having a Muslim father -- obviously Muslim Americans (are) a key part of Illinois and Chicago."
Given widespread unease and prejudice against Muslims among Americans, especially in the wake of 9/11, the Obama campaign was perhaps understandably very sensitive during the primaries and general election to downplay the candidate's Muslim roots.
With insane rumors suggesting he was some sort of Muslim Manchurian candidate, then-Sen. Barack Obama, D-Ill., and his campaign did everything they could to emphasize his Christianity and de-emphasize the fact that his father, Barack Obama Sr., was born Muslim.
The candidate's comment at a Boca Raton, Florida, town hall meeting on May 22, 2008, was typical: "My father was basically agnostic, as far as I can tell, and I didn't know him," he said.
In September 2008, candidate Obama told a Pennsylvania crowd, "I know that I'm not your typical presidential candidate and I just want to be honest with you. I know that the temptation is to say, 'You know what? The guy hasn't been there that long in Washington. You know, he's got a funny name. You know, we're not sure about him.' And that's what the Republicans when they say this isn't about issues, it's about personalities, what they're really saying is, 'We're going to try to scare people about Barack. So we're going to say that, you know, maybe he's got Muslim connections.'...Just making stuff up."
Back then, the campaign's "Fight the Smears" website addressed the candidate's faith without mentioning his father's religion:
"Barack Obama is a committed Christian. He was sworn into the Senate on his family Bible. He has regularly attended church with his wife and daughters for years. But shameful, shadowy attackers have been lying about Barack’s religion, claiming he is a Muslim instead of a committed Christian. When people fabricate stories about someone’s faith to denigrate them politically, that’s an attack on people of all faiths. Make sure everyone you know is aware of this deception."
The website also provided quotes from the Boston Globe and Newsweek mentioning his father's roots.
Since the election, however, with the threat of the rumors at least somewhat abated, the White House has been increasingly forthcoming about the president's roots. Especially when reaching out to the Muslim world.
In his April 6 address to the Turkish Parliament, President Obama referenced how many "Americans have Muslims in their families or have lived in a Muslim majority country. I know, because I am one of them."
For Barack Obama, it is an ember that he has doused time and again, only to see it flicker anew: links to Islam fanned by false rumors, innuendo and association.
And the praise he received Sunday from Minister Louis Farrakhan, leader of the black Muslim group Nation of Islam, prompted pointed questions during Tuesday night's presidential debate and in a private meeting over the weekend with Jewish leaders in Cleveland, Ohio.
[...]
The Democratic candidate says repeatedly that he is a Christian who took the oath of office on a family Bible. Yet on the Internet and on talk radio, and in a campaign introduction for Republican candidate John McCain this week, he often is depicted, falsely, as a Muslim with shadowy ties and his middle name, Hussein, is emphasized.
"If anyone is still puzzled about the facts, in fact I have never been a Muslim," he told the Jewish leaders in Cleveland, according to a transcript of the private session.
Is it any wonder that Obama will not stop in Israel as he bounces around the Middle East?
GM's dismantling opens doors for foreign carmakers
By TOM KRISHER and COLLEEN BARRY, AP Business Writers Fri Jun 5, 9:01 pm ET
DETROIT – Roger Penske is inventing a new business model on the ruins of General Motors Corp. The auto racing magnate and mega dealership owner is snapping up Saturn and opening his expanded sales network to foreign automakers looking to sell cars to Americans.
The deal announced Friday is another example of how the cataclysm that hit Detroit's three carmakers is reshaping the global automotive landscape in profound ways, reducing their worldwide influence and — if Saturn turns out as Penske envisions — opening new markets to smaller companies.
"There's no doubt that the automotive deck chairs are changing," said Michael Robinet, vice president of CSM Worldwide, a Detroit-area auto industry consulting firm.
In the shake-up, well-known brands are changing flags quicker than an oil tanker in pirate-infested waters. Italy's Fiat SpA is waiting for U.S. courts to approve its acquisition of Chrysler LLC's assets. GM has worked deals to turn its German subsidiary Adam Opel GmbH over to a Canadian auto parts company with Russian backing. And Hummer may be going Chinese, although state media there reported Friday that the deal has hit regulatory hurdles.
Yet industry experts are doubtful that the flurry of mergers and alliances will be any more durable than failed marriages of the past, proving to be just one big distraction from the underlying issue that made them so vulnerable in the first place: making more cars than people can buy.
Still, Penske, who already runs Penske Automotive Group Inc., the second-largest U.S. dealer network, thinks his business model is different enough to be successful.
GM and Penske expect to close the Saturn deal in the third quarter, with the wounded Detroit automaker continuing to build three models for Saturn to distribute.
Key to its success, though, will be the ability to sign on other global manufacturers to make cars for Saturn, giving it a diverse portfolio of vehicles that will sell whether gasoline prices are high or low.
But by opening the door to automakers not now in the U.S., such as France's Renault, Penske could alter the market here, allowing smaller automakers to compete against Detroit.
Penske, in an interview with The Associated Press, said foreign automakers would be key to his business model, but they will have to match GM quality standards before Saturn's 350-dealer network will distribute their products.
"As people around the world look at that, they have the opportunity to tap us on the shoulder and say 'we have product that we'd like to bring into the U.S.,'" he said.
Other foreign automakers who have succeeded in the U.S. began with a distribution network, then started manufacturing operations, he said.
Honda Motor Co., for example, started selling motorcycles at a few U.S. dealerships in 1959, then imported cars as its dealership ranks grew. But the Japanese company didn't build vehicles in the U.S. until 1979, when it opened a motorcycle plant in Marysville, Ohio, that later grew to build the popular Accord sedan.
Penske said he expects to begin making money immediately on Saturn, which has never been profitable for GM.
"I would expect that the model that we're putting together, the distribution model, will be profitable Day One," he said. "We'll have less costs. We'll not be in the manufacturing side of it."
Fiat's takeover of Chrysler, in its final stages, follows a more traditional logic. CEO Sergio Marchionne has been studying U.S. plants for ways to raise efficiency, and will retool one so he can start making the stylish compact Fiat 500 and a sporty Alfa Romeo or two. Under terms of Chrysler's bankruptcy plan, it will close five more U.S. plants.
In Europe, the Opel deal was reached under enormous political and union pressure to keep open all four German plants — which appeared to be one of the things that knocked Fiat out of political favor with early reports that it would close an engine factory. The winning bidder, Magna International Inc., has pledged to cut just 10,000 GM Europe jobs — a number eventually matched by Fiat.
But that deal is still not final. Fiat restated its interest Friday, although German officials downplayed prospects of Magna failing to complete the takeover.
Marchionne's aim had been to combine Chrysler and Fiat with GM's European business to create a world automotive powerhouse to produce up to 6 million cars a year, his threshold for surviving toughening world market conditions.
Such strategies have raised the obvious question among analysts: If the industry is being strangled by overproduction, why not just let the gasping giants expire?
For years, the U.S. auto manufacturing base has been too large for the market, forcing automakers to overproduce to keep plants running and flooding the market with vehicles. As a result, the Detroit Three especially have been forced to discount vehicles to sell burgeoning inventories.
But Penske said the continued restructuring by Chrysler, GM and Ford Motor Co. should solve that problem, at least in the U.S.
"I think there's no question that this re-engineering of the manufacturing base in the U.S. by the Big Three will take capacity out," he said. "But more important, the plants that will survive will be the ones that are most efficient."
Yet London-based Morgan Stanley analyst Adam Jonas said he does not expect worldwide capacity to be significantly changed a year from now. And he questioned the logic of gathering brands under one roof without real synergies.
"Did we just hook up five or six companies that don't mean anything? To get common distributors, development, common planning, common everything, it takes a lot of time, a lot more money and a lot of risk," Jonas said.
Worldwide, analysts say automakers have the capacity to produce 18 million to 20 million more cars than the market demands, leaving many plants grossly underutilized. To make money, automakers have to run their plants above 90 percent capacity, but few are doing that in a depressed global market.
Nearly 70 million cars and light trucks were produced worldwide in 2007, when the latest figures are available from the International Organization of Motor Vehicle Manufacturers.
Ferdinand Dudenhoeffer, director of the Center for Automotive Research in Gelsenkirchen, Germany, said capacity will need to shift to emerging markets such as India and China, not saturated markets like the United States and Europe, where most of the dealmaking is centered.
All the changes brings to mind past unhappy auto mergers: Ford with Land Rover and Jaguar, Chrysler with Germany's Daimler AG, and General Motors with Fiat.
A big exception, Dudenhoeffer said, is Volkswagen AG, which gathers multiple brands from Bentley to Lamborghini to Skoda under one roof. "But it took 20 years to bring them onto the same technical platforms," he said.
Analysts say bigger isn't always better, as evidenced by GM's efforts to shrink itself to become profitable.
"The story of consolidation is not the story which drives the car world," Dudenhoeffer said. "If you look at a company like Porsche, the most successful car companies in the world are small."
___
Colleen Barry reported from Milan, Italy. AP Auto Writer Dan Strumpf in New York contributed to this report.
GM to sell Saturn brand to Penske dealership chain
By DAN STRUMPF and TOM KRISHER, AP Auto Writers Dan Strumpf And Tom Krisher, Ap Auto Writers 56 mins ago
NEW YORK – General Motors Corp. has a tentative deal to sell its Saturn brand to former race car driver and dealership group owner Roger Penske, both companies said Friday.
Penske has signed a memorandum of understanding that would give his dealership chain, Penske Automotive Group, Saturn's 350 dealerships, the companies said. Penske told reporters that he expects to offer all the dealers new franchise agreements and will retain all 13,000 Saturn employees for the immediate term.
Neither Penske nor GM would say how much Penske is paying for the brand. Penske said he expects the deal to close in the third quarter.
Penske Automotive Group also distributes Daimler AG's Smart subcompacts in the U.S., but Smart has its own dealership network and Saturn dealers will continue to exclusively distribute Saturn vehicles, Penske said.
Initially, GM will continue to make cars for Saturn for two years, Penske said. But he also said he is in talks with manufacturers around the world about building Saturn cars in the future.
"We will be we'll be selling as many GM cars — a many GM-produced cars — under the Saturn brand as possible," Penske said.
Penske Automotive owns the second-largest U.S. automobile retail chain by sales. It also owns heavy-duty engine manufacturer Detroit Diesel and has race teams in the IndyCar, NASCAR and Grand-Am series.
Carl F. Galeana, who owns two Saturn dealerships north of Detroit, said Friday he was thrilled that Penske would be the Saturn buyer.
"Roger Penske is an icon in the business world," Galeana said. "I've worked with him personally. Nobody works harder than Roger Penske."
Penske received wide acclaim for heading Detroit's successful effort to host the Super Bowl in 2006.
Galeana said the fact that Penske is interested in Saturn means the brand has value.
"It allows Saturn to get back to its original roots, which is to be an independent car company," he said.
GM, which filed for bankruptcy court protection on Monday, has said it plans to shed its Saturn, Hummer, Pontiac and Saab brands. Earlier this week, GM said it found a buyer for Hummer in China's Sichuan Tengzhong Heavy Industrial Machinery Co.
However, any such deal would require Chinese Commerce Ministry approval, and reports in state-run newspapers Friday said Sichuan Tengzhong had not yet obtained such an approval.
BANGKOK – Actor David Carradine, star of the 1970s TV series "Kung Fu" who also had a wide-ranging career in the movies, has been found dead in the Thai capital, Bangkok. A news report said he was found hanged in his hotel room and was believed to have committed suicide.
A spokesman for the U.S. Embassy, Michael Turner, confirmed the death of the 72-year-old actor. He said the embassy was informed by Thai authorities that Carradine died either late Wednesday or early Thursday, but he could not provide further details out of consideration for his family.
The Web site of the Thai newspaper The Nation cited unidentified police sources as saying Carradine was found Thursday hanged in his luxury hotel room.
It said Carradine was in Bangkok to shoot a movie and had been staying at the hotel since Tuesday.
The newspaper said Carradine could not be contacted after he failed to appear for a meal with the rest of the film crew on Wednesday, and that his body was found by a hotel maid at 10 a.m. Thursday morning. The name of the movie was not immediately available.
It said a preliminary police investigation found that he had hanged himself with a cord used with the room's curtains. It cited police as saying he had been dead at least 12 hours and there was no sign that he had been assaulted.
A police officer at Bangkok's Lumpini precinct station would not confirm the identity of the dead man to The Associated Press, but said the luxury Swissotel Nai Lert Park hotel had reported that a male guest killed himself there.
Carradine was a leading member of a venerable Hollywood acting family that included his father, character actor John Carradine, and brother Keith.
In all, he appeared in more than 100 feature films with such directors as Martin Scorsese, Ingmar Bergman and Hal Ashby.
But he was best known for his role as Kwai Chang Caine, a Shaolin priest traveling the 1800s American frontier West in the TV series "Kung Fu," which aired in 1972-75.
He reprised the role in a mid-1980s TV movie and played Caine's grandson in the 1990s syndicated series "Kung Fu: The Legend Continues."
He returned to the top in recent years as the title character in Quentin Tarantino's two-part saga "Kill Bill."
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