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Archive for March, 2009

Hard Line Against GM and Chrysler Puts Bailout Firms on Notice

The administration’s display of authority sent U.S. stocks tumbling and raised questions about whether the government would take similar steps against top executives at U.S. banks that are also receiving government bailout funds.

The administration told GM and Chrysler they had failed to come up with restructuring plans that justify the billions of dollars in additional taxpayer funds they are requesting. GM was ordered to devise a new plan, while Chrysler was instructed to reach a deal with Fiat in which the Italian carmaker would take a stake in Chrysler.

The government is currently stress-testing the nation’s 20 largest banks and “maybe three fail the test,” said an executive at a large bank receiving government funds. Obama “could remove the heads of those banks,” the executive said.

“He had to do something dramatic; he had plenty of cause on this one,” the executive said, adding that the outlook for GM was extremely grim.

Bankruptcy Leads Possible Plan for Struggling GM and Chrysler

WASHINGTON — The Obama’s administration’s leading plan to fix General Motors Corp. and Chrysler LLC would use bankruptcy filings to purge the ailing companies of their biggest problems, including bondholder debt and retiree health-care costs, according to people familiar with the matter.

The move would in essence split both companies into their “good” and “bad” components. The government would like to see the “good” GM to be a standalone company, according to an administration official. The “good” Chrysler would be sold to Fiat SpA, assuming that deal is completed, this person said.

GM and Chrysler have had bankruptcy attorneys devising plans for such a move in recent months.

GM looks increasingly like it will be forced into filing for bankruptcy protection, sometime in mid-to-late May, in a plan where the automaker breaks into two companies, the surviving entity a “new GM” that maintains key brands such as Chevy and Cadillac and some international units, say several people familiar with the situation.

A key ingredient is getting the UAW to agree to an entirely new labor contract, including major reductions in health-care benefits, according to several people involved in the matter. “That’s the No.1 wildcard here,” one of these people said Monday.

At Chrysler, bankruptcy would be used to force new labor contracts and rework debt deals with secured creditors. People working on Chrysler’s behalf say the deal is risky, because the company is still not convinced that it could survive even a short-term bankruptcy.

Obama Says Auto Industry Needs to do More

WASHINGTON (AP) — President Barack Obama says General Motors Corp., Chrysler LLC and all those with a stake in their survival need to take more hard steps to help the struggling automakers restructure for the future.

Obama, in an interview with CBS’ “Face the Nation” broadcast Sunday, said the companies must do more to receive additional financial aid from the government.

“They’re not there yet,” Obama said.

Details of the plan remained tightly held Sunday, but General Motors CEO Rick Wagoner was stepping down immediately as chairman and chief executive of the Detroit automaker, said a person with knowledge of the plans. The person declined to be identified because Wagoner’s plans had not been formally announced.

Wagoner’s resignation came as the president was set to announce a plan Monday for the government to provide more money in exchange for tough concessions from union workers, bondholders and others. Lawmakers were expected to get briefed on the plan Sunday evening.

“We think we can have a successful U.S. auto industry. But it’s got to be one that’s realistically designed to weather this storm and to emerge — at the other end — much more lean, mean, and competitive than it currently is,” Obama said.

MI Jobless Rate Climbs to 12%

Michigan posted its third straight month of painful, double-digit unemployment in February, with a nation-leading 12 percent of the state’s work force out of a job.

“This would be the highest rate the state’s had since January 1984, when the rate was 12.1 percent,” said Bruce Weaver, an economic analyst with the state.

Dana Johnson, chief economist for Comerica Bank, called the jobless figure released Wednesday “grim, quite simply.”

“We have the highest unemployment rate now in Michigan in 25 years, roughly 4 percentage points above the national average,” he said.

“It just documents what everybody knows: The local economy is going through a terribly challenging time. It’s just as tough as can be.”

The U.S. is to Blame for Much of the Mexican Border Drug War Violence

MEXICO CITY, March 25 (Reuters) – An “insatiable” appetite in the United States for illegal drugs is to blame for much of the violence ripping through Mexico, U.S. Secretary of State Hillary Clinton said on Wednesday.

Clinton acknowledged the U.S. role in Mexico’s vicious drug war as she arrived in Mexico for a two-day visit where she discussed U.S. plans to ramp up security on the border with President Felipe Calderon.

A surge in drug gang killings to 6,300 last year and fears the violence could seep over the border has put Mexico’s drug war high on President Barack Obama’s agenda, after years of Mexico feeling that Washington was neglecting a joint problem.

When the prohibition of a drug or “illegal plant”,  causes more harm to mankind than the drug or plant itself,  does prohibition make sense?

It didn’t seem to work very well for alcohol.