Tuesday, October 30, 2012

Barack Obama enables outsourcing of auto industry (Chrysler)

I'll start out with saying this. I'm from a Ford family. I own and drive Fords. Always have, and probably always will. I'll also never own a foreign car. That includes foreign cars built here as profits go overseas. That also includes Big 3 cars built outside the US. Ford Fusion's in Mexico to me is the same as a Toyota. When my parents took advantage of cash for clunkers (mostly helped foreign cars) Fusions were out. No Mexican cars allowed. This goes beyond partisan politics here. I root for the Big 3 to do well - as long as the jobs stay in the US, particularly Michigan.

One of the biggest myths that gives Obama a good chance to hang on to win in Michigan (not if I have anything to say about it) and  Ohio is that he supposedly saves the auto industry. Bullshit. Romney wrote an editorial calling for reorganization and the NY Times editors gave it the headline "Let Detroit Go Bankrupt." Here's the little secret. GM and Chrysler DID go bankrupt - even after the Bush and Obama bailouts. I'm going to repeat that. GM and Chrysler DID go bankrupt. They went to bankruptcy reorganization. Obama and Romney both aren't far apart on that. Romney supported loan guarantees, similar to Chrysler in 1979.  As a Big 3 supporter and owner, they could have been better on this, but they could have worse, like Bob Corker, Gary Ackerman, Michael Cupano, Richard Shelby, and Henry Waxman. Shelby I understand because his state had foreign car plants. I don't like it, but I understand it. Corker I don't get his deal with Saturn being from his state. Nissan has plants in Tennessee, so that's also an influence. With the dems, it's the progressive movement's religious jihad against the Automobile Industry in the name of global warming going back to Al Gore's push to ban the internal combustion engine. John Dingell, hardly a conservative, was pushed off of commerce chair because he supports the auto industry.

The industry will survive, but it isn't what it was. At least 50,000 direct jobs were cut, not counting the suppliers. The Hummer was agreed to be sold to China. Saturn is gone. Pontiac is gone.

I'm not going to say that Romney is as good as Joe Knollenberg, Thad McCotter, or John Dingell when it comes to the domestic auto industry, but he's not a Corker. Obama isn't as bad as Waxman, but he's not Dingell - however there's one real nasty part of Obama's team and its reorganization demands regarding Chrysler. Obama put Chrysler under. foreign control and ownership - to a company that has never been able to break through in the US. Fiat.

From 2009 - Forbes.

Chrysler must become friends with Fiat pronto.
The U.S. government has threatened to suspend federal aid for Chrysler unless it secures a deal with the Italian carmaker within 30 days, senior administration officials told Forbes.

The repercussion of Obama forcing Chrysler to go to Fiat  is right here.

From Bloomberg news.
Fiat SpA (F) Chief Executive Officer Sergio Marchionne set a target two and a half years ago to sell 6 million cars annually by 2014, a goal that analysts and industry observers at the time deemed impossible to achieve. They were right.
Marchionne, who runs both the Italian automaker and Chrysler Group LLC, has said he will revise his forecasts when the two companies announce third-quarter results tomorrow. Analysts estimate his sales target will need to come down by 15 billion euros ($19 billion).
“Marchionne was too optimistic in 2010,” said Giuseppe Berta, a professor at Bocconi University in Milan who has written several books on Fiat and has worked as a company historian. “Fiat and Chrysler can’t grow by self-propulsion to the famous 6 million-car target.” 

And here's the devil in the details.

Fiat’s problems are bigger than many rivals’ because its troubled home country accounts for half its sales in the region. Its plants in Italy, where car sales are on pace to plunge this year to the lowest level in more than three decades, are running at 50 percent of capacity, far below the 80 percent threshold typically considered profitable.
To counter the severe slump in European sales, Marchionne is considering building Chrysler models in Italy, including Jeeps, for export to North America. The Italian government is evaluating tax rebates on export goods to help Fiat. Marchionne may announce details of his plan as soon as Oct. 30, the people said.
“This makes sense on multiple levels” as it will boost plant utilization and would cap “Chrysler’s own potential, limiting the likely cost to Fiat shareholders of buying out the Chrysler minorities,” Stuart Pearson, an analyst at Morgan Stanley in London, said in a note to investors today. “However we see no quick answers, and fear debt could surprise negatively first,” said Pearson, who rates the stock underweight with a target price at 3.90 euros.
Jeeps built in Europe to be imported here? Jeeps outsourced? You got to be kidding me. That's an American icon. Keep in mind that it was Obama's demand that Chrysler goes to Fiat.

Romney's getting heat for his comments and ad about outsourcing, but Bloomberg's story here shows that he's not off the mark. GM and Chrysler DID go bankrupt under Obama, and Chrysler WAS put under foreign control with outsourcing, and Chrysler's manufacturing may very well go to Europe, if not necessarily China.  

If the Peter Principle in Chief Obama wins a second term thanks to being lucky that reorganization happened when he was CEO (so he can portray himself as the hero he isn't), he's not going to have to worry about this anymore. I expect Marchionne to announce the outsourcing to be official November 10th or so, no matter who wins. Election cover.

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