(Source:  AP via Yahoo)

The Supreme Court on Tuesday cleared the way for Chrysler LLC’s sale to Fiat, turning down a last-ditch appeal by opponents that included consumer groups and three Indiana pension plans.

The court rejected a plea to block the sale of most of Chrysler’s assets to the Italian automaker. Chrysler, Fiat and the Obama administration had warned that the high court’s intervention could have scuttled the sale.

A federal appeals court in New York had earlier approved the sale, but gave opponents until Monday afternoon to try to get the Supreme Court to intervene.

Justice Ruth Bader Ginsburg ordered a temporary delay just before a 4 p.m. deadline on Monday. A little more than 24 hours later, the court freed the automakers to complete their deal.

The opponents include a trio of Indiana pension plans, consumer groups and individuals with product-related lawsuits.

The court issued a brief, unsigned opinion explaining its action. To obtain a delay, or stay, someone must show that at least four of the nine justices find that the issue raised is serious enough to warrant hearing a full appeal and that a majority of the court will conclude the lower court decision was wrong.

“The applicants have not carried that burden,” the court said.

Indiana Treasurer Richard Mourdock expressed disappointment with the decision and said options seem limited for opponents of the sale. “Obviously the supreme court of the land is the supreme court of the land,” Mourdock said. “The United States government has, I continue to believe, acted egregiously by taking away the traditional rights held by secured creditors.”

(Source:  The Auto Channel)

Edward E. Whitacre, Jr., former chairman and CEO of AT&T Inc., will become chairman of the New GM when the company is launched later this summer, GM’s interim Chairman Kent Kresa announced today. Kresa will continue to serve as interim chairman until the launch.

Whitacre, 67, was chairman and CEO of AT&T Inc. and its predecessor companies from 1990 to 2007. During his tenure, which began with Southwestern Bell, Whitacre led the company through a series of mergers and acquisitions–including that of AT&T in 2005–to create the nation’s largest provider of local, long distance and wireless services. He serves on the boards of ExxonMobil Corporation and the Burlington Northern Santa Fe Corporation and holds a degree in industrial engineering from Texas Technological University.

The six other members of the current board will most likely retire no later than the approval of the sale of GM assets to the new entity. A selection process is currently underway for four more directors to serve on the board of the New GM. In addition, the Canadian government and the new UAW Voluntary Employee Benefit Association (VEBA) will each nominate one director, bringing the total number of New GM directors to 13.

Click  here to read the entire article.

(Source: Streetsblog & Rotor.com)

The House is poised this week to take up the so-called “cash for clunkers” bill, which aims to boost the slumping U.S. auto market by giving out tax credits of $3,500 and up to anyone who trades in a gas-guzzling car for a more efficient model.

With the Senate Majority Leader threatening to make Senators work five days a week to speed up work on legislative priorities, lawmakers expect to finish a war supplemental bill this week that would include a provision for cash for clunkers and then Congress will turn its attention to healthcare and climate change legislation.

House Democrats must settle the issue of whether to include in the war supplemental a provision that would give car buyers a voucher worth up to $4,500 for trading gas-guzzlers for more fuel-efficient vehicles.  There is tremendous bipartisan support for this proposal, especially with the recent bankruptcy of General Motors.

The likely passage of Sutton’s bill this week could be bad news for a stronger “cash for clunkers” plan that’s being promoted by Sen. Dianne Feinstein (D-CA), who displayed welcome candor last month in calling the Sutton plan “the auto industry’s version” of “cash for clunkers” and “unacceptable” to American drivers.

Feinstein’s proposal would require drivers to achieve a 25 percent fuel-efficiency increase before receiving a tax credit for ditching their clunkers. But Michigan Sen. Debbie Stabenow (D) is pushing for a trade-in tax credit that’s very similar to Sutton’s — truck owners would only have to increase their fuel efficiency by 2 miles per gallon to be eligible.

Feinstein’s proposal would require drivers to achieve a 25 percent fuel-efficiency increase before receiving a tax credit for ditching their clunkers. But Michigan Sen. Debbie Stabenow (D) is pushing for a trade-in tax credit that’s very similar to Sutton’s — truck owners would only have to increase their fuel efficiency by 2 miles per gallon to be eligible.

(Source:  Foreign Policy Magazine)

Cartoon Courtesy: Slate Magazine

Outside a small group of nihilists and committed free marketeers who’d have let General Motors go under, no matter the price, few question the necessity of the Obama administration’s plan for the once great American company’s reorganization in bankruptcy. But as a U.S. taxpayer, and therefore one of GM’s brand-new owners, I have my doubts about our ability to manage this new property. Yes, GM’s previous owners proved unable to run a competitive car company in a global marketplace, but is the U.S. government really the best one to transform it? Already, the particulars of the Chapter 11 arrangement lead me to fear that the same sort of internal politics, unthinking nationalism, and generalized aversion to engineering risk that have hobbled GM for decades will continue to haunt its new incarnation.

One place where you won’t hear for-attribution criticism of the “new” General Motors these days is GM headquarters. Perforce they are obligated to display their gratitude with the unfailing enthusiasm that a $50 billion-plus investment in a failing business minimally entitles its benefactors to expect in return. Although the collegial tone of the new rapprochement comes 50 years late, it is heartening nonetheless to see American industry finally welcome Washington’s involvement in matters like safety, fuel economy, and emissions regulation.

Even Robert “Maximum Bob” Lutz, GM’s outgoing product czar and vice chairman, and a fierce critic of government meddling from the “give me back my bullets” wing of Detroit’s old school, has experienced an astonishing change of heart, at the ripe age of 77. Speaking to a gathering of journalists in Motor City the other week, Lutz unhinged every jaw in the house when he shared his thoughts on how the White House automotive task force ought to become a permanent fixture. Of the unprecedented government-industry collaboration the Chrysler and GM bankruptcies begat, Lutz, an ex-Marine attack pilot and near-libertarian known for making his daily commute in a decommissioned Czech jet fighter, quipped: “Jeez, it only took 30 years for somebody to finally figure [government-industry partnership] out.”

Er, right. Thirty years and a couple of epochal bankruptcies.

Questions about the government’s intentions for the new GM Lite already abound. Notably, what will and what should the company’s policies be, now that it is controlled (in theory) by and for the benefit of U.S. taxpayers, who own 60 percent of its shares?

Will GM be underwritten so as to lead the market in the direction of fuel saving and new technologies? Or will it trim its sails and attempt to get by on its sometimes-profitable religion of pickup trucks and SUVs, perhaps ones that get slightly better mileage? GM is still tooled up to build them.

Ever since the 1920s, when GM’s Alfred P. Sloan introduced the precepts of what came to be known as Sloanism — a car for every purse and purpose — a good day at a car dealership was one when you sold someone “more car than they need.” Automobile marketing often appeals to man’s baser emotions. Greed, lust, and envy come to mind, as do excessive horsepower and other costly and unnecessary options that have been larded on to new cars to boost profits for longer than any of us have been alive. So, you can’t help wondering, has the U.S. government entered the business of encouraging people to live out their most insane automotive dreams? Will it labor to create demand for automobiles when and where there is no need, as generations of car companies have done before it?

And where do GM’s new taxpayer/shareholders stand on the matter of outsourcing work to Mexico or South Korea or China or anywhere else, as the old GM did whenever it got the chance? Will Chevy production lines in places like Toluca and Silao, Mexico, come home to the USA? The old GM went in for cheap overseas labor. Has the government now entered the business of using taxpayer money to export jobs? Is this the change we need?

Myriad practical and philosophical quandaries aside, one vital series of questions about the “new” GM — which brands will be kept, sold, or terminated — has already been answered. Chevrolet, Buick, Cadillac, GMC, Australia’s Holden, and South Korea’s Daewoo are to be spared. To be sold: Saturn, Hummer, and Sweden’s Saab are available outright, and operating control of GM’s German division, Opel, is to be sacrificed in a deal brokered by the German government outside U.S. bankruptcy proceedings. For the scrap heap: Pontiac, the venerable division that once claimed to “build excitement.” In limbo: Opel’s English sister brand, Vauxhall.

Click here to read the entire article.

(Source: New York Times & Fox News)

It is not every 31-year-old who, in a first government job, finds himself dismantling General Motors and rewriting the rules of American capitalism.  

Image Courtesy: New York Times

But that, in short, is the job description for Brian Deese, a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry.  

“There was a time between Nov. 4 and mid-February when I was the only full-time member of the auto task force,” Mr. Deese, a special assistant to the president for economic policy, acknowledged recently as he hurried between his desk at the White House and the Treasury building next door. “It was a little scary.”

But now, according to those who joined him in the middle of his crash course about the automakers’ downward spiral, he has emerged as one of the most influential voices in what may become President Obama’s biggest experiment yet in federal economic intervention.  So what does Mr.Deese’s resume look like? It should be impressive, considering he’s managing America’s $458,000 per dayinvoluntary investment.

Deese grew up in a Boston suburb, the son of a political science professor at Boston College. He moved to Vermont and attended Middlebury College, where he studied political science and also took time to host a campus radio show called “Bedknobs and Beatniks,” described in one write-up as “a format of music, news, discussion and banter.”

While far more prominent members of the administration are making the big decisions about Detroit, it is Mr. Deese who is often narrowing their options.

A month ago, when the administration was divided over whether to support Fiat’s bid to take over much of Chrysler, it was Mr. Deese who spoke out strongly against simply letting the company go into liquidation, according to several people who were present for the debate.

“Brian grasps both the economics and the politics about as quickly as I’ve seen anyone do this,” said Lawrence H. Summers, the head of the National Economic Council who is not known for being patient whenever he believes an analysis is sub-par — or disagrees with his own. “And there he was in the Roosevelt Room, speaking up vigorously to make the point that the costs we were going to incur giving Fiat a chance were no greater than some of the hidden costs of liquidation.”

Mr. Deese was not the only one favoring the Fiat deal, but his lengthy memorandum on how liquidation would increase Medicaid costs, unemployment insurance and municipal bankruptcies ended the debate. The administration supported the deal, and it seems likely to become a reality on Monday, if a federal judge handling the high-speed bankruptcy proceeding approves the sale of Chrysler’s best assets to the Italian carmaker.

Click here to read the entire article.

(Source: Wall Street Journal)

 The biggest hurdle to the historic sale of General Motors Corp.’s Hummer brand to a little-known Chinese manufacturer of dump trucks and industrial machinery may be receiving Beijing’s seal of approval.

The Obama administration has already expressed strong support for the proposed sale to Tengzhong Heavy Industrial Machinery Co. But before it can buy Hummer, Tengzhong, based in Sichuan province, needs support from three different Chinese government agencies governing overseas investment, economic planning and China’s tight controls on foreign exchange.

China’s economic planning agency will have to weigh the Sichuan-based company’s desire to buy the company against its policies to encourage more fuel-efficient vehicles and automobile-industry consolidation.

Meanwhile, a visit to Tengzhong’s facilities, where workers make small batches of machinery parts at a time, highlight questions about the company’s technical readiness to manufacture a complex passenger vehicle — especially if some manufacturing of the vehicles eventually shifts to China, as is “logical” if the bid succeeds, a person familiar with the situation said.

Normally, China’s high-profile outbound investments involve government ministries at every step of the process, because the buyers are owned by the central government. Tengzhong, however, is privately held, with few assets and no experience in commercial automobiles.

“There aren’t many precedents for this transaction,” says Jeanette Chan, a partner at law firm Paul Weiss in Hong Kong.

She notes new rules that came into effect May 1 require a number of approvals before Tengzhong and GM can sign a binding agreement. The rules stipulate that overseas investments of more than $100 million require central government approvals, while provincial governments can sign off on smaller deals.

Central government agencies expected to review the deal include the Ministry of Commerce, the National Development and Reform Commission and the State Administration of Foreign Exchange. Of these, the commerce ministry’s approval is most important; if its approval process runs smoothly, it will take at least 30 working days, Ms. Chan said.

While the company appears to have ties in the local government, that won’t likely translate to any clout on the national level. On Wednesday, Tengzhong’s CEO Yang Yi said the company was “in the middle of the approval process.”

Key criteria include whether the company will be able to fund the purchase and succeed in developing the business. Tengzhong hasn’t released information about its finances, but it appears to be relatively small. Analysts expect Tengzhong to pay $200 million to $300 million for Hummer.

Click here to read the entire article.

(Source: ENR.com & Wall Street Journal)

The Obama administration said as much as $17 billion in additional federal money is needed to maintain roads and bridges over the next two years, underscoring the challenges policy makers face as driving habits change.

Image Courtesy; Stateline.org via Gmanet.com

The recession and gas-price increases over the past two years have caused many consumers to drive less and switch to more fuel-efficient cars. The result has been a fall in revenue from taxes on gasoline and vehicle purchases, which are used to fund state and local transportation projects.

Officials from the  Obama administration and U.S. Dept. of Transportation have said that the trust fund will not have enough cash to cover commitments to states for highway projects, according to Senate Environment and Public Works Committee Chairman Barbara Boxer (D-Calif.) and the panel’s top Republican, James Inhofe of Oklahoma.

According to administration and DOT officials, $5 billion to $7 billion will be needed by August to avert having to slow down Federal Highway Administration reimbursements to state DOTs, Boxer and Inhofe said on June 2. The lawmakers added that a further $8 billion to to $10 billion will be needed in fiscal year 2010 to maintain the highway program at its current level. Congress has set the 2009 federal highway program obligation limit at $40.7 billion.

Boxer and Inhofe discussed the trust fund’s problem at a June 2 committee hearing on the nomination of former Arizona DOT Director Victor Mendez to be the new head of the Federal Highway Administration.

Inhofe raised the possibility of tapping the interest on the Highway Trust Fund balance as one solution. That interest goes to the general Treasury, not the trust fund.

The administration has resisted calls to increase the 18.4-cent federal tax on a gallon of gas; the tax hasn’t been raised since 1993.

Last year, Congress transferred $8 billion from the government’s general fund to the highway trust fund in response to a similar shortfall, allowing states to move ahead with hundreds of job-creating transportation projects. Congress may do that again this year.

Lawmakers could also consider tweaking the economic-stimulus law so states could use some of their stimulus money to compensate for other budget shortfalls. In most cases, states can’t use stimulus funds to compensate for budget deficits in their transportation-spending plans.

Congress and the administration are crafting legislation that would determine how the federal government funds transportation projects over the next several years. With the White House opposed to a gas-tax increase, lawmakers are trying to identify new money sources to maintain the nation’s infrastructure.

One hint of their approach could come later this month when Rep. James Oberstar (D., Minn.), chairman of the House Transportation and Infrastructure Committee, is slated to unveil his blueprint for transportation spending.

(Source:  The Detroit News & SFGate.com)

Supporters have dropped an attempt to add “cash for clunkers” legislation to a tobacco regulation bill now before the Senate, a setback in efforts to boost car sales with federal subsidies.

“There are technical details to work out and the senator continues to look for a vehicle to pass this very important piece of legislation,” said Brad Carroll, a spokesman for Sen. Debbie Stabenow, a co-sponsor of the bill.

Two congressional aides said the measure was derailed by objections from the Senate Appropriations Committee to using money from the $787 billion economic stimulus package for the measure, which would offer up to $4,500 credits for consumers trading in older, low-gas-mileage vehicles.

In January, Sen. Dianne Feinstein, D-Calif., introduced a bill, S247, that would give vouchers to people who turn in a car or truck that gets 15 or fewer miles per gallon to a dealer that scraps it.

Rep. Betty Sutton, D-Ohio, introduced one in the House, HR1550. A compromise version was attached to the 900-page energy bill that was passed last month by the House Energy and Commerce Committee.

Sen. Debbie Stabenow, D-Mich., introduced an almost identical one in the Senate. Her bill, S1135, would provide vouchers of $3,500 or $4,500, depending on the difference in gas mileage between the clunker and the new vehicle. The vouchers could only be used to buy or lease new vehicles, not for used vehicles or mass transit.

Environmentalists oppose the two industry-supported bills because they would provide vouchers to people who scrap more fuel-efficient vehicles (18 mpg or less) than under the Feinstein proposal (15 mpg or less).

Last month, Sen. Feinstein proposed an alternative that is less stringent than her original bill but stricter than Stabenow’s. For details, see links.sfgate.com/ZHHC.

It’s not clear whether the Senate will back the Stabenow bill, the new Feinstein approach or a compromise.

“Fiscal conservatives and environmentalists oppose the more permissive Stabenow bill as an expensive subsidy for the ailing auto industry, while union and manufacturing interests oppose the stricter Feinstein approach, which would likely favor fuel-efficient imported vehicles,” said Benjamin Salisbury, an analyst with FBR Capital Markets, in a report.

“The Senate could vote on both amendments and add the most popular one to unrelated legislation giving the Food and Drug Administration regulatory authority over tobacco products,” Salisbury wrote.

Idea likely to stick around

That didn’t happen Wednesday, as many expected. But with President Obama in favor of cash for clunkers, the idea is not likely to die.

Becker hopes Congress will not rush into passing a bill without enough research and debate to determine how much the program will cost and who will benefit most. “Somebody might come along and do clunker dating,” matching up people who want to buy new cars with people who have clunkers, he says.

He adds that Germany started a 1.5 billion euro cash-for-clunkers program this year and it has already swelled into a 5 billion euro program.

Consumers waiting to buy a new car until a bill passes should first figure out if their existing car would qualify under the scrapping plan. If so, the next question is whether the voucher would be worth more than the price they would get if they sold or traded in their car. If so, they should figure out whether the new car they want to buy would qualify. With so many unknowns remaining, it’s hard to reach a conclusion.

(Source: Automobile Magazine & Autoblog & CNN Money)

(Source: Financial Times)

Reducing America’s reliance on oil by raising petrol prices to European levels through increased taxes or regulation is not politically feasible, says Steven Chu, US secretary of energy.

The admission comes as Congress considers a cap- and-trade system that opponents say will substantially increase petrol prices just as oil prices soar to their highest level in six months.

In the past Mr Chu, a Nobel laureate, has argued that, if the US wanted to reduce its carbon emissions, policymakers would have to find a way to increase petrol prices to levels in Europe. But in an interview on Wednesday with the Financial Times, Mr Chu said: “At this moment, let me be frank, it is not politically feasible.”