Consensus Grows At Senate Hearings: Reform Or Bankruptcy By March 31

As good an account of today’s Senate Hearing as I’ve seen:

Not long after this astonishing display, Sen Corker again had the floor, and he worked steadily towards a compromise based on reality. He pointed out that Gettelfinger literally could not force his union brothers to accept any sacrifices unless “bankruptcy is the endgame.” His solution: force the UAW to reduce its labor costs to transplant levels and turn at least half of VEBA into equity and get GM bondholders to drop their debt at 30 cents on the dollar by March 31, at which point the federal government would assume debtor-in-possession financing for a reorganization. He also recommended that Chrysler merge with GM and said that Ford was simply “tagging along” for money it admits it doesn’t need.

Rick Wagoner parks on the stripes before asking Congress to save his industry. To offset the bad PR of flying to the last hearing in a private jet, Wagoner reportedly drove from Detroit to a DC hotel in a mild hybrid Malibu, then giddyapped the Cruze/Volt test mule from there to the congressional lot above. Ford CEO Mullaly drove a Ford Escape hybrid, a model that is actually for sale, if you can find one that hasn’t been snapped up.

Despite support from Senators Dodd and Schumer, and warnings about the trickle down effects of bankruptcy, Bloomberg reports that Congress has not been receptive. Although the auto execs and union officials are publicly against it, congressional staff members have been broaching the idea of a planned bankruptcy, or reorganization.

No matter what the outcome, I suspect the big loser will be auto workers that have been counting on health care and retirement benefits, and a UAW that will find themselves in a poor bargaining position with the restructured companies and/or new owners in other countries.

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I never thought getting 60 senators in the D column was such a big deal, as some of the Dems are very conservative and wouldn’t necessarily hang with Obama anyway. Nate Silver lays it all out here:

Who Are The Swing Senators?

… Moderate Republicans are an endangered species these days, but there are still a few of them left, as well as several other quasi-moderates who either get along with Obama or are under some form of electoral pressure in their home states. Conversely, there are more than a couple of Democrats in the chamber whose votes Obama can’t take for granted.

In practice, there will be a group of four or five senators in each party who line up just to either side of the 60-seat threshold and will find that they’re suddenly very much in demand. If Obama’s approval ratings are strong, he should have little trouble whipping the couple of Republican votes he needs into shape, and should clear 60 comfortably on key issues. But, if Obama proves to be unpopular, there remain enough conservative, red-state Democratic senators to deny him a simple majority on key issues, much less 60 votes.

Also, Ped Shed, a great blog on urban issues, has come back to life.

TDM-pedia

In his latest post Laurence Aurbach includes a link to the Online Transportation Demand Management (TDM) Encyclopedia from the Victoria Transport Policy Institute, a wonderful resource.

TDM is sort of like carbon offsets, but better:

Contributions to TDM measures are more visible, immediate, local and effective than offsets. TDM measures encourage non-auto travel and carpooling, make better use of transit-oriented development, and so multiply the beneficial impacts of transit-oriented development investments. Carbon offsets may send that money to other countries where they mainly have value as charitable donations to energy projects.

I just charge it
Where do I sign?
Charge it
Show me the dotted line
Charge it
I don’t have the time to waste

Credit-card industry may cut $2 trillion lines

(Reuters) - The U.S. credit-card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said. …

Closing millions of accounts, cutting credit lines and raising interest rates are just some of the moves credit card issuers are using to try to inoculate themselves from a tsunami of expected consumer defaults.

My Astyk-influenced wife is now bugging me to cut back on the credit card. I use it for almost everything, then send off a huge payment every month, telling myself that’s OK, but she’s right of course. Or they’re right. I don’t think as hard about buying extra groceries when it all comes down to a swipe of plastic at the end. I’d gladly use the debit card, but reports of card number hijacking put me in fear of overdrafts and whatnot. For all their flaws, credit cards offer some protection against fraud. And carrying enough cash to pay for gasoline just worries me.

Astyk also noticed that McDonalds “food” has become the second most-charged purchase in the USA. Astyk-Hat also has my wife cutting out meat, replacing it with beans and rice.

Full lyrics to Charge It, by Tim Curry:

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Update: China’s #3 Dongfeng Definitely Casts Eyes On GM

Now, there are fresh and more concrete indications about a possible Chinese move on GM. Hu Xindong, Secretary to the Chairman of China’s third largest auto maker Dongfeng, said they have been contacted by financial groups which have close relationships with GM. Topic of the discussions: A possible takeover. This according to China’s National Business Daily via Gasgoo. …

Meanwhile, Shanghai Automotive Industry Corp (SAIC) has concluded their own negotiations, and officially said they are not considering buying GM. That because of “GM’s huge costs of compensating workers and other follow-up expenditures,” as Wang Liusheng, an auto analyst at China Merchants Securities did put it.

Subtext: Taking over GM nuts and all would have been nuts in Chinese eyes. The Chinese are interested in the assets, but they balk at the liabilities, especially the ones with a UAW attached. Any other outside investor who owns some sanity would look at it the same way.

The pistonheads at TTAC have been predicting the demise of GM for about four years now, and see little of value coming out of the Cash-Starved Three’s revised plan:

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Times are tough all over, but governments are trying to prime the money pump:

Detroit Rescue Plan

General Motor’s board is currently reviewing the rescue plan that will be released on Tuesday and will be considered by Congress next week. GM said on November 7th that it may not have sufficient cash to operate after December. A 10-12 page summary of the plan will be released to the public and a more detailed 80 page version will be sent to Congress. The plan is rumored to entail closing factories, eliminating half the US brands, delaying health care benefit payments, and converting some of the companies’ $43 billion debt into equity in the company.

Sounds like voluntary reorganization.

Spanish car sales fall 50 pct, worst since 1993

Spanish car sales fell 49.6 percent in November, marking the biggest fall in nearly 16 years as Spaniards slashed spending amid credit restrictions and soaring unemployment, industry data showed on Monday. … Spain’s government last week budgeted 800 million euros ($1.04 billion) towards its struggling car industry amid fears the sector could lose 50,000 jobs. … Spain’s unemployment rate was by far the highest in Europe in October at 12.8 percent, according to the European Union.

Awaiting comment from our Spanish correspondent.

Manufacturing Slows Sharply In China

Manufacturing activity declined sharply in November, as measured by the official purchasing managers’ index. The PMI fell to 38.8, from 44.6 the month before, the China Federation of Logistics and Purchasing said Monday. A reading below 50 indicates contraction. … After the pace of economic growth slowed in the third quarter to 9.9%, a half-decade low, the government announced on Nov. 9 a 4 trillion yuan ($585 billion) stimulus package focused on upgrading infrastructure, raising rural incomes via land reform and implementing social welfare projects such as affordable housing and environmental protection.

China and Growth

Unlike most of the world’s economies, China is widely believed to need a minimum of 7 percent annual growth to maintain social stability. New jobs are required for the millions of young workers graduating from school each year and the millions more that continue to migrate from rural areas into the industrialized urban economy.

As a major consumer of world energy supplies, the state of China’s economy will play a major role in oil demand for a long time to come. Officially the Chinese government remains optimistic that it has the internal resources to continue to grow even with faltering exports. Last week Beijing cut interest rates by the most in 11 years and unveiled a $586 billion stimulus plan to keep the economy growing in the midst of a global recession.

On Black Friday, we only bought a few used books at the thrift store. My wife bought several of the mysteries that she and her mother enjoy, and I found a copy of 1984, which I remember a lot about, but don’t remember reading anymore.

That night was all reruns, so we watched internet videos, one of which was a BBC dramatisation of The Machine Stops, a 1909 short story by EM Forster.

You may know EM Forster from reading or watching A Room With a View, Howard’s End or A Passage to India.

Forster’s story envisioned a world in which everyone mostly stays put in their below-ground, climate-controlled quarters, communicating with others only across a video screen network. Needs are met and lives are managed by machines, known collectively as The Machine. Asimov wrote many short stories with a similar theme of humans served and managed by a well-meaning central computer, THX-1138 showed medicated humans in underground cells, and the recent film Wall-E portrayed a space ark of chubby passengers tended by an evil device, but in Forster’s story the Machine is neither good nor evil. When working perfectly, the Machine is as good as designed, but humans only remember how to make limited repairs. Entropy prevails:

… But for the most part panic reigned, and men spent their strength praying to their Books, tangible proofs of the Machine’s omnipotence. There were gradations of terror - at times came rumours of hope - the Mending Apparatus was almost mended - the enemies of the Machine had been got under- new “nerve-centres” were evolving which would do the work even more magnificently than before. But there came a day when, without the slightest warning, without any previous hint of feebleness, the entire communication-system broke down, all over the world, and the world, as they understood it, ended.

Peak oil and climate doomers present tales like The Machine Stops as a perfect analogy for our faltering financial system, or even our industrial society, but I’ve been reading repeated predictions of impending doom for almost a decade now.

While I drove us back to Baltimore, my wife read a few chapters of Sharon Astyk’s Depletion and Abundance aloud to me. She had latched on to the book as soon as it came out of the box. Astyk addresses the current situation in practical terms that other homemakers can understand. While no Pollyanna, she believes that if we prepare, we can fashion decent lives while using much less energy. Now my wife wants to cancel some utilities and rebuild the kitchen without the refrigerator.