Word: auto
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...Better to break hearts locally than shatter the greater economy - and that's what the collapse of GM and Chrysler threatens to do, according to the White House auto task force that is undertaking the monumental rescue mission. In the deal being cobbled, GM's stockholders will be wiped out, replaced as equity owners by the Treasury Department, with 70%, and the United Auto Workers (UAW), with 17.5%. GM's business in Europe, Opel, will be sold. As many as 14 U.S. factories are marked to close. The iconic Pontiac brand is probably finished. Under a new labor agreement with...
...bonds have refused the company's debt-for-equity swap, making bankruptcy all but inevitable. For purist capitalists, the lasting significance of GM's pending Chapter 11 (and Chrysler's bankruptcy, filed a month ago) is the overwhelming intrusion into the private sector by Barack Obama and his auto task force at Treasury. "The day they fired the CEO of General Motors" - Rick Wagoner was dismissed by task-force co-chairman Steve Rattner in late March - "is a day we will look back on with great regret," predicts Corker, a reluctant and critical supporter of the bailout. "The government...
...Kicking the Can When Obama drafted Rattner and another financier, Ron Bloom, to lead his auto task force, he instructed them to "treat these transactions in a commercial manner." That is to say, restructure the companies in a way that makes good business sense. The "commercial" mantra proved fleeting. The first imperative of commerce - to add value and thus earn profits - is too narrow to host all the civic expectations attached to the auto industry. If GM's only task were to make money, the company would shutter its car factories (or move them to low-cost countries) and churn...
...that's not possible at a time when Obama and congressional leaders are requiring Detroit to do more to advance conservation and alternative energy and create 5 million green jobs. "I am absolutely committed to working with Congress and the auto companies to meet one goal: the United States of America will lead the world in building the next generation of clean cars," Obama said in March. Other public buttons have been pressed as well. Senators Robert Byrd and Jay Rockefeller of West Virginia called on Treasury to go easy on small-town car dealers, who create jobs...
...that nearly fruitless. Marchionne, CEO of Italy's Fiat, had sniffed an opportunity lurking by the Chrysler deathbed. Chased from the American market a generation ago by its comic reputation for poor quality, Fiat seemed an unlikely rescuer. But Marchionne entered the picture as the It boy of the auto world, having slashed costs, retooled management and refreshed styling to boost sales of the firm's cute little cars. He wanted back into the U.S., provided it didn't cost him anything. (Watch TIME's video about an optimistic Dodge dealer...