DawgTalkers.net Forums DawgTalk Everything Else... The Auto Bailout Revisited:

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I'll ask again ... if the Iraq war was so bad, why didn't Obama do what he said he was going to do and withdraw all of our troops by the end of 2009?

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YT...this comment deserves a separate response...

You ask, "if the Iraq War was so bad"....

YT...obviously you feel the 4,486 dead American soldiers in the Iraq War, was not "so bad" ?

...over 32,223 wounded American soldiers, was not "so bad" ?

...or that the financial cost for the American taxpayers, now at 4 trillion dollars, was not "so bad" ?

YT...and your criticism of Obama is he did not fix the Iraq War mess fast enough.

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You ask, "if the Iraq War was so bad"....

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No, he asked, "if the Iraq war was so bad, why didn't Obama do what he said he was going to do and withdraw all of our troops by the end of 2009?"

You're quoting only a portion of his question, which takes it out of context.... and then you give us a lengthy answer to the out of context question. How progressive of you!

You're touching on the core of the problem.

I used to have disposable income. When the economy tanked - I lost most of that. I am not union, nor have I ever been, for what that's worth. When times are good - I make money. When times are bad - I don't.

Your example of you yourself making $12 an hour more on union jobs should raise some eyebrows in my opinion. Did you do better work, or have better workmanship when you do union work? Or was the difference simply "hey, union guys/gals make more cause we're union"?

The money comes from somewhere. If you were being paid $12 more per hour for a union job - that tells me the union was ripping off the customer - probably due to some state or federal regulation that union labor had to be used for that specific project. And the non-union company that didn't get the job even though their bid (if they were even allowed to bid) was cheaper, got screwed over.

This is exactly the problem. That extra $12 per hour did not fall out of the magic bucket in the sky. Rather than be More productive, SFAIK union labor is usually Less productive due to the increased "protection" from the union. It also becomes more difficult to get rid off the truly incompetent.

It is exactly this "I want mine NOW, without having to do any extra work for it!" that almost drove GM into bankruptcy. Many other, smaller, companies have disappeared over the years for just these reasons.

Union leadership has all the corruption and incompetence of politics, without any real oversight.

If you are worth more, you'll get it. If you're not, join a union.

I had the water department out to fix a water line break in front of my house.

No exaggeration, they had 15 people out to the site at first ...... with about 3 of them actually working.

They had one guy show up and turn the water main off while they repaired the line. He came to the site, shut off the water, and left. When they were done fixing the water line, the guy, in a different truck from everyone else, showed back up and turned the water main back on.

I would have been furious if I had been the couple of guys who actually worked. There was the one guy who jackhammered the street. Then the brought in a machine to dig up the street. They sent 2 guys down into the holes they dug. At that point, there were probably 6 or 7 guys still standing above watching, drinking coffee, and talking.

I really wish I had taken a picture of the first moments when they showed up. It was almost funny, because they couldn't fit all of the vehicles and workers into the area of the break.

Did it look like this?

that picture looks so completely wrong.

i mean, noone is holding a clipboard to pretend to have some important piece of information at their fingertips.

http://finance.fortune.cnn.com/2012/06/13/financial-crisis-myths/?hpt=hp_t2

The 5 myths of the great financial meltdown
By Allan Sloan, senior editor-at-largeJune 13, 2012: 5:00 AM ET


Five years after the U.S. economy teetered on collapse, here are five reasons why we need to stop pointing fingers and fix the problems that nearly sank us.

FORTUNE -- It's hard to believe, but it's been five years and a day since the U.S. financial system's problems surfaced, and we're still not even remotely close to being able to feel good about the economy. My admittedly arbitrary start date is June 12, 2007, the day the Wall Street Journal reported that two Bear Stearns hedge funds that owned mortgage securities were in big trouble. At the time, things didn't seem all that grim -- in fact, U.S. stocks hit an all-time high four months later. But in retrospect the travails of the funds, which collapsed within weeks, were a tip-off that a crisis was afoot. Problems kept erupting, efforts to restore calm failed, and we trembled on the brink of a financial abyss in 2008-09. Things have gotten better since then, but still aren't close to being right.

There's a long way to go before the economy, and people, recover from wounds inflicted by the financial meltdown. The value of homeowners' equity -- most Americans' biggest single financial asset -- is down $4.7 trillion, about 41%, since June 2007, according to the Federal Reserve. The U.S. stock market has lost $1.9 trillion of value, by Wilshire Associates' count. Even worse, we've got fewer people working now -- 142.3 million -- than then (146.1 million), even though the working-age population has grown. So while plenty of folks are doing well and entire industries have recovered, people on average are worse off than they were. Bad stuff.

How should you think about the past five years? What can we learn from them? And what can we as a society do to minimize the chances of a recurrence?

I've been writing about the financial meltdown and its aftermath almost continually since I joined Fortune the month after the symptoms surfaced. Now, five years into the problem, I find myself getting increasingly angry and frustrated watching myth supplant reality about what happened, and seeing fantasy displace common sense when it comes to fixing the problems that got us in this mess.

Ready? Okay, here we go.

Myth No. 1: The government should have done nothing.

There's an idea gaining currency that everything the government did, from the Troubled Asset Relief Program (the now infamous TARP) to the Federal Reserve's innovative lending programs and rate cutting, just made the problem worse. And that we should have simply let markets do their thing.

Wrong! Wrong! Wrong! During the dark days of 2008-09, when giant institutions like Washington Mutual and Wachovia and Lehman Brothers failed and the likes of Citigroup (C), Bank of America (BAC), AIG (AIG), GE Capital (GE), Merrill Lynch, Morgan Stanley (MS), Goldman Sachs (GS), and huge European banks were near collapse, letting them all go under would have brought on the financial apocalypse. We could well have ended up with a downturn worse than the Great Depression, which was the previous time that failures in the financial system (rather than the Federal Reserve raising rates) begat a U.S. economic slowdown.

You want to let big institutions fail? Okay, look at what happened when Lehman was allowed to go under in September 2008. (The Treasury and Fed insist there was no way to save the firm, though I wonder if they would have devised one had they not gotten tons of grief six months earlier for not letting Bear Stearns collapse.)

Lehman's collapse froze short-term money markets, making normal finance impossible. A run on money-market funds began when the Reserve Primary Fund, an industry pioneer, said it was "breaking the buck" because of losses on Lehman paper. Goldman Sachs and Morgan Stanley were about to fail because hedge funds and other "prime brokerage" customers began yanking their cash in response to prime brokerage assets at Lehman's London branch being frozen.

The federal government (including the Fed) had to front trillions of dollars and guarantee trillions of obligations -- a total I calculated last year (see "Surprise! The Big Bad Bailout Is Paying Off") at more than $14 trillion -- to stop the panic.

Lehman was a beta test for letting markets take care of problems themselves -- and it failed miserably.

Myth No. 2: The government bailed out shareholders.

The real beneficiaries of the government bailout of financial institutions weren't their stockholders -- it was their lenders.

Shareholders of troubled giant financial institutions that got TARP money and other goodies have suffered severe pain since June 11, 2007, the day before the problem surfaced (See the table at the bottom of the page). Losses exceed 99% at Fannie Mae and Freddie Mac and are 97% at AIG and 85% or more for other stricken institutions taxpayers bailed out. The S&P 500 (SPX), by contrast, is down only 13%. Yes, a 100% loss would be appropriate for Citi, Bank of America, and AIG, which essentially failed. But their shareholders sure haven't emerged as winners.


No bailout: Lehman Brothers employees take leave in 2008.

It's patently unfair that lenders to these companies escaped unscathed, as did counterparties to AIG, which were paid with taxpayer money. Why did the government do the right thing at GM (GM) and Chrysler, where it forced creditors to take haircuts before financing the companies' reorganizations, and the wrong thing by bailing out creditors at financial companies?

The Treasury contends that whacking financial company creditors would have created more problems than it solved. "In a severe financial crisis," said a very senior Treasury official whom I agreed not to name, "the primary obligation is to prevent panics and the severe economic damage they cause to the innocent. In those crises, if you hair-cut the creditors of a systemically important institution, it's like adding accelerant to a burning fire."

One of the prominent dissenters from that approach is Sheila Bair, former chair of the FDIC (and a current Fortune columnist). Bair says that "there was not a market disruption" when bondholders of Washington Mutual Savings Bank suffered serious losses as the Federal Deposit Insurance Corp. seized WaMu in the biggest bank failure in history. My heart is with Bair. But I can totally understand why the Treasury and Fed acted as they did.

The bailing-out-creditors problem has supposedly been solved for future failures, as we'll see in a bit. But I have my doubts.

Myth No. 3: The Volcker Rule will save us.

Let's get one thing straight. Washington is unwilling to change the financial system drastically, the way it was changed in the Great Depression's aftermath. Rather than shrinking giant financial companies so that they're no longer too big to fail -- a process that Dick Fisher, head of the Dallas Fed, wonderfully likens to stomach-shrinking bariatric surgery -- we're trying to legislate the problems away. Hence a whole raft of new, tough-seeming -- but almost incomprehensible -- regulations.

The major one: the Volcker Rule, which is supposed to let insured banks do securities transactions on behalf of their customers but not speculate for their own accounts. That sounds great. But it won't work. As I predicted, differentiating between market making and speculating is proving impossible to define in a simple, enforceable way. The first version of the proposed rule ran almost 300 pages. Good luck.

Instead of the overhyped Volcker Rule, we need the severely underhyped Hoenig Rule. I've named it for Tom Hoenig, former head of the Kansas City Fed and current acting vice chair of the FDIC.

In a marvelous paper presented in May of last year -- to my regret, I didn't read it until this past May -- Hoenig (pronounced ha-nig) proposes breaking up banks by function, not size. It's so simple, it's brilliant. He would eliminate all trading and hedging by banks. If a bank wants to hedge its loan portfolio, it would have to buy a hedge, not make one. "You have to take those high-risk activities out of insured banks, not try to regulate them more," he told me.

He would allow banks to engage in investment-banking activities such as underwriting bonds and stocks -- so we're not talking about a return to the Depression-era Glass-Steagall rules that Congress repealed in 1999. It's a smart separation of high-risk from low-risk activities.

He would also alter rules governing money-market funds and change the way "repurchase" transactions are treated in bankruptcies. Money funds would have to mark their assets to market rather than guarantee holders $1 a share. That requirement, combined with the end of the implied federal support of money fund accounts (which the government guaranteed at the crisis' peak), would enforce serious discipline on fund managers.

The idea is to improve financial transparency and severely limit the "shadow banking system" that allowed the likes of Lehman, Bear Stearns, and Citi's "structured investment vehicle" subsidiaries to pile up money-fund and repo obligations that didn't show up on their parents' financial statements.

Hoenig is simple. And workable. And would infuriate Wall Street and its fellow travelers. It's too bad that Tom Hoenig's imprimatur is nowhere near as valuable in Washington as Volcker's is. Hoenig would probably fix "too big to fail." With Volcker, there's no hope.

Myth No. 4: Taxpayers are off the hook for future failures.

Dodd-Frank reform legislation passed in 2010 is being touted in Washington as a way to deal with future meltdowns of big financial institutions without risking taxpayer dollars or giving creditors a free pass.

It would work like this: The FDIC, using its new powers, would seize so-called systemically important financial institutions -- SIFIs -- and wipe out their shareholders. It would then convert the SIFIs' parent company debt to stock in a new SIFI at a severe discount. The new SIFI could raise short-term cash to fund its operations by borrowing from the Treasury or via Treasury-backed loans. The Treasury would have first claim on everything the new SIFI owns. The Fed would be out of the game.

"We want to hold both shareholders and bondholders accountable," Martin Gruenberg, acting head of the FDIC, told me. "We've got the authority we need. Can we maintain stability and hold the company accountable to the marketplace? We've tried to develop the capability to do that as an alternative to a bailout."

They've tried -- but have they succeeded? I have my doubts. The FDIC's detailed proposals sound great. But like the Volcker Rule, it will turn into a game of financial Whac-A-Mole as SIFIs end-run the rules once they are made final. For instance, it took me about three seconds to realize that SIFIs could borrow at the operating-company level rather than at the parent company. ("It may be worthwhile to consider requiring a certain level of debt at the holding company," Gruenberg said.) There will doubtless be dozens of other ways around the rules.

I'm rooting for the FDIC. But my brain tells me that in this game, the financial moles won't stay whacked.

Myth No. 5: It's the government's fault.

Yes, there were plenty of reckless and immoral borrowers taking out mortgages they knew (or should have known) they couldn't afford. And yes, you can make a case that the federal government's zeal to increase homeownership levels was partly responsible for lowering lending standards. But the idea that the government is primarily to blame for this whole mess is delusional. It was the private market -- not government programs -- that made, packaged, and sold most of these wretched loans without regard to their quality. The packaging, combined with credit default swaps and other esoteric derivatives, spread the contagion throughout the world. That's why what initially seemed to be a large but containable U.S. mortgage problem touched off a worldwide financial crisis.

We've had more than enough shrieking and demonizing since this mess erupted in 2007. It's time that we stopped trying to blame "the other" -- be it poor people or rich people or Wall Street or community organizers -- for the problems that almost sank the world financial system.

It's time -- after five years, it's well past time -- for us to stop pointing fingers at one another, and to fix the excesses that almost sank us. The market sure didn't work very well. The government regulation solutions, like the Volcker Rule and Dodd-Frank "resolution rules," aren't going to work very well. We need common sense, like the Hoenig Rule, and markets (as opposed to a zillion regulators) that can enforce discipline on institutions that will not be too big to be allowed to fail.

Those, my friends, are the lessons of the past five years. Let's hope that at some point we'll finally learn them.

Big bank shareholders' financial pain


--Additional reporting by Doris Burke

This story is from the July 12, 2012 issue of Fortune.

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I used to have disposable income. When the economy tanked - I lost most of that. I am not union, nor have I ever been, for what that's worth. When times are good - I make money. When times are bad - I don't.

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arch...if people have more disposable income, does that help your business...do you make money when people spend their disposable income on your product or service?

Damn those union workers for spending their disposable income to help your business...right?

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Your example of you yourself making $12 an hour more on union jobs should raise some eyebrows in my opinion.

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arch...here you go again...those damn union workers that spend their disposable income at area businesses ...don't you just hate them?

Maybe Pitt was being under paid before his place of employment landed a government contract.

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The money comes from somewhere. If you were being paid $12 more per hour for a union job - that tells me the union was ripping off the customer - probably due to some state or federal regulation that union labor had to be used for that specific project. And the non-union company that didn't get the job even though their bid (if they were even allowed to bid) was cheaper, got screwed over.

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arch...you ever hear rich people complain about how much other rich people make?

Yet some folks like to point their finger at blue collar workers and declare "they make too much money"...and if those blue collar workers happen to be members of a "union", that's even worse...

But everyone needs to think what this country's economy is going to look like if the middle class income/wages continue to decline. Gonna be a lot of small businesses go belly up as the disposable income shrinks.

It would seem logical, if Americans had more disposable income, small business and the economy as whole would benefit.

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By my count, there are 6 City Mangers/Supervisors (who are not Union), watching one Union guy doing all the work.

...that is pretty close to reality.

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Right because union people are the only people on the planet that work.

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Did it look like this?

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By my count, there are 6 City Mangers/Supervisors (who are not Union), watching one Union guy doing all the work.

...that is pretty close to reality.

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Yup.

By your count there are 7 people there. The picture shows 11. So much for union work, right?

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arch...so you want me to count everyone pictured...I can do that...

1 Federal Compliance Manager
1 Logistics Manager
1 PR Manager
1 Project Manager
1 Product Development Manager
1 Safety and Compliance Manager
1 City Permit officer
1 Vito, local mobster..standing between two "Managers" and happens to be talking to the
Project Development Manager...hmmm.
1 Union steward
1 Senior Union member
1 Union worker named Jose

TOTAL FOR THE CITY = 8 watching...
... 6 CITY MANAGERS and 1 CITY PERMIT OFFICER with 1 local mobster talking with his buddy, the PD Manager (likely related).

TOTAL FOR THE UNION = 3...
...1 senior union member who just got out of the hole
...and 1 union steward who saw all the CITY MANAGERS standing around the hole and came over to see what they were looking at.

...and last we have JOSE...the 1 UNION WORKER, taking his turn in the hole, while the 7 CITY MANAGERS ( + 1 relative, Vito) look on, wondering what they can do next to impress their boss.

If you take off the "progressive" blinders, you'll see that the only ones sittin' on their arses are the union steward and the federal official.

I highly doubt Jose and Vito are related.

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I highly doubt Jose and Vito are related.

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FF...never said they were.

A few lines above the one you are referencing, I wrote about the possibility that Vito and the PD manager might be related.

The second reference to Vito should be taken in the context of the first reference to Vito.

Here are the official numbers for the loss the taxpayers will take on the GM deal ..... even as GM loses market share ....... and these numbers might be optimistic.

Treasury: U.S. to lose $25 billion on auto bailout | The Detroit News | detroitnews.com
http://www.detroitnews.com/article/20120813/AUTO01/208130392

Washington -The Treasury Department says in a new report the government expects to lose more than $25 billion on the $85 billion auto bailout. That's 15 percent higher than its previous forecast.

In a monthly report sent to Congress on Friday, the Obama administration boosted its forecast of expected losses by more than $3.3 billion to almost $25.1 billion, up from $21.7 billion in the last quarterly update.

The report may still underestimate the losses. The report covers predicted losses through May 31, when GM's stock price was $22.20 a share.

On Monday, GM stock fell $0.07, or 0.3 percent, to $20.47. At that price, the government would lose another $850 million on its GM bailout.

The government still holds 500 million shares of GM stock and needs to sell them for about $53 each to recover its entire $49.5 billion bailout. At the current price, the Treasury would lose more than $16 billion on its GM bailout.

The steep decline in GM's stock price has indefinitely delayed the Treasury's sale of its remaining 26 percent stake in GM. No sale will take place before the November election.

Treasury spokesman Matt Anderson said the costs were still far less than some predicted.

"The auto industry rescue helped save more than one million jobs throughout our nation's industrial heartland and is expected to cost far less than many had feared during the height of the crisis," Anderson said.

The Obama administration initially estimated it would lose $44 billion on the bailout but reduced the forecast to $30 billion in December 2009.

But the recent estimates are not as optimistic as last year.

The Treasury Department said in a May 2011 report that its estimate of auto bailout losses was $13.9 billion. The Congressional Budget Office also estimates a $14 billion loss. The CBO has written off $8 billion of the government's auto bailout as an unrecoverable loss.

Republican presidential candidate Mitt Romney has decried the losses on the auto bailout and insisted that forcing GM and Chrysler Group LLC to go through bankruptcy first would have saved taxpayers money.

But President George W. Bush — who gave the automakers and their finance arms about $25 billion in his final weeks in office in bailout funds — said there wasn't time.

Taxpayers incurred a $1.3 billion loss on the $12.5 billion bailout of Chrysler.

The Treasury also has put on hold an initial public offering initially planned for last year in Ally Financial Inc. because of market weakness. The government holds a 74 percent majority stake in the Detroit auto finance company as part of its $17.2 billion bailout and has recovered $5.7 billion.

GM CEO Dan Akerson told employees at a town hall meeting Thursday that the company was working to take actions to boost the automaker's sagging price.

But, but, but, but..........we were told the loans were already repaid.......

Knowing how freely they inflate numbers, I'd be curious to see how they arrived at the claim of "1 million jobs saved", and I'd like to know just how many of those claimed have since been lost anyway.

I'd bet that the number actually saved is not even remotely close to 1 million.

If you think that's bad, we'll probably have to bail them out again!

Forbes

General Motors Is Headed For Bankruptcy -- Again

President Obama is proud of his bailout of General Motors. That’s good, because, if he wins a second term, he is probably going to have to bail GM out again. The company is once again losing market share, and it seems unable to develop products that are truly competitive in the U.S. market.

Right now, the federal government owns 500,000,000 shares of GM, or about 26% of the company. It would need to get about $53.00/share for these to break even on the bailout, but the stock closed at only $20.21/share on Tuesday. This left the government holding $10.1 billion worth of stock, and sitting on an unrealized loss of $16.4 billion.

Right now, the government’s GM stock is worth about 39% less than it was on November 17, 2010, when the company went public at $33.00/share. However, during the intervening time, the Dow Jones Industrial Average has risen by almost 20%, so GM shares have lost 49% of their value relative to the Dow.

It’s doubtful that the Obama administration would attempt to sell off the government’s massive position in GM while the stock price is falling. It would be too embarrassing politically. Accordingly, if GM shares continue to decline, it is likely that Obama would ride the stock down to zero.

GM is unlikely to hit the wall before the election, but, given current trends, the company could easily do so again before the end of a second Obama term.

In the 1960s, GM averaged a 48.3% share of the U.S. car and truck market. For the first 7 months of 2012, their market share was 18.0%, down from 20.0% for the same period in 2011. With a loss of market share comes a loss of relative cost-competitiveness. There is only so much market share that GM can lose before it would no longer have the resources to attempt to recover.

To help understand why GM keeps losing market share, let’s look at the saga of the Chevy Malibu.

The Malibu is GM’s entry in the automobile market’s “D-Segment”. The D-Segment comprises mid-size, popularly priced, family sedans, like the Toyota Camry and the Honda Accord. The D-Segment accounted for 14.7% of the total U.S. vehicle market in 2011, and 21.3% during the first 7 months of 2012.

Because the D-Segment is the highest volume single vehicle class in the U.S., and the U.S. is GM’s home market, it is difficult to imagine how GM could survive long term unless it can profitably develop, manufacture, and market a vehicle that can hold its own in the D-Segment. This is true not only because of the revenue potential of the D-Segment, but also because of what an also-ran Malibu would say about GM’s ability to execute at this time in its history.

GM is in the process of introducing a totally redesigned 2013 Chevy Malibu. It will compete in the D-Segment with, among others, the following: the Ford Fusion (totally redesigned for 2013); the Honda Accord (totally redesigned for 2013); the Hyundai Sonata (totally redesigned for 2011); the Nissan Altima (totally redesigned for 2013); the Toyota Camry (refreshed for 2013); and the Volkswagen Passat (totally redesigned for 2012).

Automobile technology is progressing so fast that the best vehicle in a given segment is usually just the newest design in that segment. Accordingly, if a car company comes out with a new, completely redesigned vehicle, it had better be superior to the older models being offered by its competitors. If it is not, the company will spend the next five years (the usual time between major redesigns in this segment) losing market share and/or offering costly “incentives” to “move the metal”.

Uh-oh. At this point, it appears that the 2013 Malibu is not only inferior to the 2012 Volkswagen Passat, it’s not even as good as the car it replaces, the 2012 Chevy Malibu.

If you follow the automobile enthusiast press, you know that, under the leadership of then product czar Bob Lutz, GM went all out to develop a competitive D-Segment car for the 2008 model year. The result was the 2008 Chevy Malibu, which managed to get itself named by Car and Driver magazine as one of the “10 Best Cars” for 2008.

However, when tested head to head against six other D-Segment sedans in the March 2008 issue of Car and Driver, the 2008 Malibu came in third, behind the Honda Accord and the Nissan Altima. Adjusted to the points scale that Car and Driver uses today, the 2008 Malibu scored 187 points, 6% lower than the winning 2008 Honda Accord’s 198 points.

Still, third was a respectable showing. The previous generation of the Malibu, a darling of rental car fleets, would have come in dead last in any D-Segment comparison test.

Acknowledging the importance of the D-Segment to the company’s future, GM’s CEO, Dan Akerson, ordered that the introduction of the redesigned 2013 Chevy Malibu be advanced by six months, from the fall of 2012 to the spring of 2012.

In their March 2012 issue, Car and Driver published another D-Segment comparison test, pitting the 2013 Chevy Malibu Eco against five competing vehicles. This time, the Malibu came in dead last.

Not only was the 2013 Malibu (183 points) crushed by the winning 2012 Volkswagen Passat (211 points), it was soundly beaten by the 2012 Honda Accord (198 points), a 5-model-year-old design due for replacement this fall. Worst of all, the 2013 Malibu scored (and placed) lower than the 2008 Malibu would have in the same test.

Uh-oh.

Digging deeper, the picture just gets worse. Despite its mild hybrid powertrain, which is intended to provide superior fuel economy (at the cost of a higher purchase price and reduced trunk space), the 2013 Malibu Eco delivered the same 26 MPG in Car and Driver’s comparison test as the Passat, the Accord, and the Toyota Camry.

In a recent speech, Dan Akerson admitted that GM’s powertrain technology had fallen behind that of competitors in some cases. This is illustrated by the Malibu Eco’s EPA gas mileage ratings. At 25 MPG City/37 MPG Highway, the Malibu Eco is not as fuel-efficient as the conventionally-powered 2013 Nissan Altima (27 MPG City/38 MPG Highway).

It might be possible for GM to give the Malibu a better powertrain during its five-year-product life cycle. Unfortunately, there is no way that they will be able to correct its biggest design flaw, which is its short wheelbase.

For years, automobile companies have been trying to design cars with the longest possible wheelbase (distance between the front and rear axles) for a given overall vehicle length. A longer wheelbase provides advantages in the areas of styling, ride, and legroom.

In developing the 2013 Malibu, GM decided to shorten the wheelbase by 4.5 inches from that of the previous-generation Malibu, from 112.3 inches to 107.5 inches. This gave the 2013 Malibu the shortest wheelbase in the entire D-Segment.

The Car and Driver comparison-test-winning Passat has a wheelbase of 110.4 inches, which gives it a “unique selling proposition”, the roomiest back seat in the D-Segment. The Passat has combined front and rear legroom totaling 81.5 inches, 3.5 inches more than the Malibu.

This may not sound like a lot, but, like baseball, automobile design is “a game of inches”.

For a 6’1” tall man, sitting in the back seat of the 2012 Passat behind a similar-sized driver is like sitting in a limo. His knees will be nowhere near the back of the front seat. In contrast, the same sized man would have to struggle to get into the back seat of the 2013 Malibu, and would have to sit with his legs splayed once he did.

Rear seat legroom is important in the family sedan market, not only for the comfort of adult passengers, but also for the ease of using children’s car seats. The 2013 Nissan Altima also has longer wheelbase and more rear seat legroom than does the Malibu.

Chevrolet is not a premium brand, like Mercedes or BMW. Since the 1920s, Chevy’s essential market positioning has been “more car for your money”. Unfortunately, the 2012 Volkswagen Passat is more car for the money than is the 2013 Malibu. There will not be anything that GM will be able to do about this for the next five years other than to reduce the price of the Malibu by offering “incentives”. This will eat into the company’s profitability, which is already weak.

As a company, General Motors peaked in 1965, when it commanded 50.7% of the U.S. market, and made a stunning-for-the-time $2.1 billion dollars in after-tax profits. Adjusted by the GDP deflator to 2011 dollars, GM made $12.1 billion in after-tax profits on $117.9 billion in revenue.

In 1965, Volkswagen was tiny compared to GM. It produced only 1.6 million vehicles, about 22% of GM’s 7.3 million. VW’s total revenues were only 11% of GM’s. The most powerful engine you could get in VW’s volume family car, the Beetle, had 40 horsepower. The biggest engine you could get in GM’s equivalent, the 1965 Chevy Impala, had 425 horsepower.

In the first half of 2012, Volkswagen sold almost as many vehicles as GM did, 4.6 million vs. 4.7 million. And, its total revenues were much higher, $119.2 billion vs. $75.4 billion for GM. Part of this is the result of currency exchange rates, but VW had a significantly higher operating profit margin than GM, 6.8% vs. 5.7%.

Under the leadership of Ferdinand Piech, who is kind of like a German-speaking, automobile industry version of Steve Jobs, Volkswagen is determined to become the biggest and most profitable car company in the world. And, right now, they are eating GM’s lunch.

Not only has Volkswagen taken an important share of the U.S. D-Segment with their new Passat, but they are pulling away from everyone in the troubled European market, where GM is losing money on its Opel subsidiary. The headline in the current edition of Automotive New Europe’s “Global Monthly” is, “Buried: VW Uses Europe’s Crisis to Crush Rivals”. In this case, GM is one of the “crushees”.

Will GM be able to turn itself around, and save American taxpayers from losing $26.5 billion on Obama’s bailout?

One way to answer that question is to compare the 2013 Chevy Malibu against the 2012 Volkswagen Passat, as Car and Driver did. Results: VW, first out of six; GM, dead last. However, additional insight can be obtained by looking at how GM’s CEO, Dan Akerson (63), stacks up against Professor Doctor Martin Winterkorn (65), the man handpicked by Ferdinand Piech in 2007 to be his replacement as CEO of Volkswagen AG.

Akerson has an engineering degree, but he also has a Master’s Degree in Economics, and his first big job was as CFO of MCI. Akerson was CEO of General Instrument, and then of Nextel, and then of XO Communications, which went bankrupt in June 2002. He joined the private equity firm, the Carlyle Group, in 2003.

Akerson got his first job in the automobile industry when he was named CEO of GM in late 2010. Recently, he has been hiring and firing top GM executives at an alarming pace, and he is understood to be working on a major reorganization of the company. Akerson recently gave a televised speech to GM employees on the need for “integrity”.

Martin Winterkorn has a PhD in Metallurgical Engineering, and he has spent his entire career in the automotive industry. At the 2011 Frankfurt Auto Show, Winterkorn was caught on amateur video sitting in, and studying Hyundai’s newly introduced i30, a competitor to VW’s best-selling family car, the Golf. Here is an excerpt from a story about this incident published along with the video by The Truth About Cars, an auto industry blog:

“
“(Martin Winterkorn) pulled on the adjuster of the steering column, and heard – nothing. At Volkswagen, there is an audible (“klonk!) feedback whenever the steering column is adjusted.

Immediately, Klaus Bischoff, head of Volkswagen Brand Design was summoned. He pulled on the adjuster: No sound. “Da scheppert nix,” exclaimed Winterkorn in his heavy Bavarian accent. “There is no rattle!”

Winterkorn was livid: “How did he pull that off?” He, the blasted Korean. “BMW doesn’t know how. We don’t know how.” He, the blasted Korean, must have found out how to battle the dreaded Scheppern.

Tension is high. This could affect careers. Someone quickly explains that there had been a solution, “but it was too expensive.” That gets Winterkorn even more enraged. “Then, why does he know how?” For less money. He, the Korean. There is no answer. Hyundai has beaten Volkswagen at the Scheppern front.

Winterkorn measures the A-pillar, runs his hands over the plastic. He walks away, his entourage trots after him. Deeply in thought and very worried.”

Uh-oh. While Dan Akerson is busy rearranging the deck chairs on GM’s Titanic, Martin Winterkorn is leading VW to world domination via technical excellence.

“The game isn’t over until it’s over”, but if President Obama wins reelection, he should probably start giving some serious thought to how he is going to justify bailing out GM, and its unionized UAW workforce, yet again. And, during the current campaign, Obama might want to be a little more modest about what he actually achieved by bailing out GM the first time.

Before we lose any more money, barry should sell our 500,000,000 shares to Bain Capital.

While Ford was not a recipient of the "bailout" as people tend to see it....lets not forget their role in it and lets not forget that they got money from the government in other avenues as well. It just wasn't called a "bailout". First they lobbied FOR the bailout on behalf of the other 2....and as a part of that asked and received a 9 billion dollar Line of Credit. So while they did not get the cash..they essentially had 9 Billion up for grabs...kudos to them for not taking advantage of that.....But AT THE SAME TIME this was all taking place they did take 5 Billion dollars form the DOE as part of a 14 bilion dolllar project towards changing their linup to fuel efficient cars...(so now we know where the 9 billion figure they asked for comes from)....

People act as if Ford never took a dime of taxpayer money...which is BS...they took 5 BILLION DOLLARS...and no one is asking if they paid that back yet.....

Is GM in trouble...a little...the Malibu may not be as big of a hit as they are expecting...but there are a few hitches that the article doesn't hit on...First the Malibu Eco will not be the most popular Malibu in the lineup. And therefore not the standard by which to test against. Second the mild hybrid system in this particular Eco is mated to an engine that is due to be replaced sometime this year. with a smaller, more powerful, and more efficient one. But GM made the decision to get the model out in time for the Detriot Auto Show which meant using the older engine....Whether this is a good move or not remains to be seen. I do agree with the wheelbase discussion...however...most if not all of the shortening came from bringing the wheels closer from the front...(more nose).

The writer criticizes GM because Akerson is supposedly focusing on management structure and not on design, Well he obviously has not been looking ant the new vehicles coming out of GM. GM is doing what Ford was able to do before the bailout....what Volkswagon has had the stability to do all along. And that is get their front office together so that it is leaner and everyone is on the same page. You saw how bad the Browns have functioned the past decade because our FO and coaches have been on different playbooks and incompetent.

And if you have seen the innovations in the new Cadillacs, the Buicks, and the new Chevy's(take a look at the 2014 Impala) you will see that GM "IS" focusing on design over bean counting. But those changes don't come overnight.

GM is on the highwire...and they could teeter to either side. But they are stepping forward. And each step brings them closer to the platform and stability. That platform is just coming into sight. For their sake...lets hope they get their quickly.

Oh...I am not saying that Ford is irresponsible or that they are not repaying or anything against Ford. I think Ford is doing a great job right now and it is where GM should be (or at least wants to be) stability wise in a few years...My comments are more against the ingnorant masses who give them a free pass thinking that they didn't take a dime...didn't lobby for the bailout nor get anything out of the bailout....

....and some of us have horrible first hand experiences after being directly involved with unions...and what they do (or don't do) for their workers.

I've worked with a number of hospitals with unions. What a nightmare. They literally handcuff the hospitals to the point that important functions cannot be performed adequately. Terrible situations.