Troubled Toyota

In watching Toyota deal with one crisis after another over the past couple of weeks, I cannot help but feel a little Schadenfreude about the whole situation.  Here’s why…

For all the time that I was with Chrysler, Toyota was the bogeyman of the automotive industry.  We were constantly pounded on that we needed to be more like Toyota.  What was worse, being told to do more with less to play catch-up adds up to a no-win situation.  I have no doubts that GM and Ford were in the same boat.  And we’ve seen where that has led two of the three automakers.

The cornerstone of strength of Toyota has always been its quality, but it has taken some dings in the past couple of years.  Its foray into the pickup truck market resulted in engine sludge problems and rusting frames.  Now with the accelerator sticking on several models, and reported brake problems with both the “green” Prius hybrid & the flagship Lexus brand, it just adds some much needed tarnish on the Toyota logo.  Face it – some humility is needed in order for reality to really sink in and address problems that happen with every manufacturer.

But they aren’t alone – the automotive media has also contributed to the Toyota myth of perfect quality.  I understand that the crap that the Detroit-3 churned out in the 70’s & 80’s earned the disdain of the masses and media alike.  But to continue the wholesale trashing of an iconic domestic industry that has improved tremendously from those years while either burying or ignoring the troubles of the foreign competition is beyond my understanding.  Just review this earlier post, and you’ll understand.

Toyota had it in their sights to become the largest automotive manufacturer in the world, and in the process, lost their way.  Becoming bigger doesn’t mean that you are better, and Toyota just found that out the hard way.

Who’s Going To Pay For It?

OK, now all of you folks out there (especially the Obama supporters) stop and think for a little bit on the following:

  • A multi-billion dollar “stimulus” bill was passed and signed that was full of waste and earmarks.
  • Multiple banking and finance institutions were bailed out with billions from the government treasury.
  • Two car companies were also given loans, declared bankruptcy, and were not only able to write the loans off but got more money to see them through the bankruptcy and reorganization.
  • A global warming climate change bill was just passed in the House this past week with carbon cap & trade as its centerpiece.
  • The President is pushing for a universal healthcare coverage policy for anyone that wants it.
  • We are constantly bombarded with information that Social Security and Medicaid/Medicare are going to go broke in the near future.

Now who do you think is going to pay for all of the above? 

From ABC’s commentator George Stephanopoulos:

White House senior adviser David Axelrod said the president won’t rule out a health care reform bill that includes a middle-class tax hike.

"The president had said in the past that he  doesn’t believe taxing health care benefits at any level is necessarily the best way to go here.  He still believes that," Axelrod told me on This Week, "But there are a number of formulations and we’ll wait and see.  The important thing at this point is to keep the process moving, to keep people at the table, to the keep the discussions going. We’ve gotten a long way down the road and we want to finish that journey."

I pressed Axelrod on whether Obama will draw a line in the sand and veto any bill that funds health care reform with tax hikes for people making under $250,000 a year — despite a pledge Barack Obama made during the 2008 presidential campaign not to raise taxes on the poor and middle-class.

"One of the problems we’ve had in this town is that people draw lines in the sand and they stop talking
to each other.  And you don’t get anything done.  That’s not the way the president approaches us.  He is very cognizant of protecting people — middle class people, hard-working people who are trying to get along in a very difficult economy.  And he will continue to represent them in these talks," Axelrod said.

"But they’re also dealing with punishing health care costs, and that’s something that we have to deal with."

This should be a clue for the clueless.  For those who don’t want to think because it hurts their brains, then here’s the answer:  You are!!

What people don’t seem to realize is that every time Congress passes laws and the President signs them, there is usually some cost attached to them.  If it is a spending bill, then the funds are drawn from the Treasury.  The funds from the Treasury are collected by taxes, and you pay the taxes either directly or indirectly.  It won’t matter where you are in the social ladder, you will pay one way or another.

And you thought that the TEA Parties were ladies socials instead of “taxed enough already” protests.

Just thought you would like to know…

It’s a Done Deal.

Yes, it’s now official:  Fiat now owns Chrysler without paying a penny.  Instead, they bartered technology.

My only question is:  Where is Chrysler going to get the money to use the technology to put into their cars?  Supposedly, Chrysler doesn’t have any money – they’re broke.  Otherwise, why did Chrysler declare bankruptcy?

Oh boy, oh joy…

Was That A Bump or a Pothole?

Yesterday evening, the Supreme Court cleared the sale of Chrysler to Fiat over the objections of the three Indiana secured bondholders.  From SCOTUSblog.com:

Insisting that it was denying a postponement “in this case alone,” the two-page order said the challengers had not met their burden of showing that a delay was justified.  The reference to this case alone perhaps was a signal that the Court did not want its order to appear to give advance clearance for any other government rescue plan — such as that to save another auto company, General Motors.

The order allows a closing of the deal by no later than next Monday, because it lifts a temporary stay that Justice Ruth Bader Ginsburg had issued on Monday; she did so, apparently, only to give the Court time to ponder the issue.

Presumably, the closing could occur before next Monday, since that was the “end date” only in the Chrysler agreement. 

The Court said nothing about the biggest issue lurking in the case: the legality of using federal “bailout” money to pay for the rescue of an auto manufacturer.  In fact, the order stressed that “a denial of a stay is not a decision on the merits of the underlying legal issues.”

Actually, a second but no less important issue (at least in my mind) is the legality of the Federal Government (specifically, the Executive Branch) to flout bankruptcy law to place unsecured creditors interests before secured creditors.  The Supreme Court did not address this concern at all in its decision.  But I’m not surprised…

If you remember, the Supreme Court ruled in 2005 that the Government could acquire property via eminent domain and sell that property to another individual if that action would be in the public good.  While this could be considered a “stretch” of that decision, the sale of Chrysler could be considered in the public good since the company would not be liquidated, thereby saving the livelihoods of thousands of workers and preserving the tax-base of many communities.

Caught in this mess are still the 789 Chrysler dealers that are being closed down (also devastating many communities) and the bondholders like the Indiana group that were forced to accept pennies on the dollar for their $Billions in secured investments.

Quite frankly, if I was an investor, this decision would send a chill down my spine.  This means that any secured investment is not secured, and that the terms of the note could be ignored.

Yeah, it really is all about money…but should it?

What is disturbing to many (including the few readers of this blog) is that our government is now in the business of business more than ever.  Make no mistake, is always has been, but now it is more blatant than ever.  It used to confine itself to regulations, rules, & tariffs to try & keep consumers from being injured and otherwise harming the environment unnecessarily.  Now government is making sweeping changes including deciding ownership of companies and how they are run from within the companies themselves.

We, as a nation, must decide if this is the role that we want our government to take.  If so, then we are no better than the old USSR, Venezuela, Cuba, and a host of other Socialistic countries.  And look where their economies are.  And that is cause for alarm.

Just a Speed Bump…

Just heard on the radio that the US Supreme Court has delayed the sale of Chrysler to Fiat.  The announcement from SCOTUSblog states:

Supreme Court Justice Ruth Bader Ginsburg put a temporary hold Monday on the deal to sell Chrysler to save it from collapse.  Her order, however, simply gives her or the full Court more time to ponder whether to postpone the sale further, or allow it to go forward.  The order can be found here.

It will be interesting how this shakes out.  Fiat could pull out of the deal if it is delayed past June 15.

I still think that the sale will go through, although there may be some “modifications.”