• Toyota Under Political Siege

Toyota’s has overnight passed through a political tunnel that has severely tarnished its image as the greatest automaker on the planet. With U.S. Transport Secretary Ray LaHood leading the attack, and Unions piling on, the Administration’s denials of nationalist impulses are transparent. The White House apparently believes that it is now appropriate to extend corporate bashing to foreign controlled companies. Attacking banks went over well with the fawning MSM, now that same media is jumping on the train and fueling passions against a company which directly or indirectly provides hundreds of thousands of jobs to North American taxpayers.

It is peculiar that the Administration and Congress, along with friendly members of the MSM, are attacking a well-run and successful Japanese company so aggressively, while giving a comparative pass to any Chinese company transgressions with millions of faulty and dangerous products distributed across America.

The answer appears to rest in the undue power and influence which the United Auto Workers (UAW) currently enjoys with Washington, and very directly with President Obama.

Mr. LaHood can pretend otherwise, but his “stop driving” Toyota comment had the intended consequences of directly affecting the perception of Toyota in the marketplace. Democratic California Congressman Henry Waxman found easy fodder with his accusations of misleading statements from Toyota as to the causes of the more serious vehicle incidents. Waxman is playing to the home crowd along with the UAW, in his chastisement of Toyota - the underlying reason being Toyota’s closure of a unionized plant in California. How can Waxman possibly believe he is being helpful to his constituents?

Laws and government oversight are in place to deal with managerial malfeasance when it comes to auto companies knowingly misleading the public, or selling vehicles it knows are faulty. Carmakers have in the past been guilty of such practices. There is no evidence here that Toyota has for years sold cars into the market that it knew were faulty. Should facts in time prove to the contrary, the executives responsible will endure the consequences. Engineering and manufacturing mistakes occur, and all auto companies have had to endure the damage that such events present. Although Toyota may be mishandling it’s PR response to the faulty accelerator pedals, given the facts as currently available, the company appears to be responding responsibly to a recall that will cost its international shareholders billions of dollars.

Toyota will survive and will continue to manufacture some of the best vehicles on the road. Current Washington attitudes toward business and industry, and now toward foreign owned businesses, however, presents an attitude that may prove very harmful in the short, mid and long term, to long lines of unemployed now reaching 17% levels. This calculated, aggressive and belligerent continuation of impugned inclination toward a significant, and otherwise pristine employer, should give us pause. Leadership in Washington is flailing in an ill-perceived wind of populism.

This Administration should come out strongly and audibly reversing its course, and it should reign in the misguided thrashing of a major North American employer.

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• A SOLUTION FOR DETROIT, GM, & FRIENDS

General Motors tells us it has plans for the long term. Long term plans are dreams. Unfortunately, GM’s horizon reality isn’t long enough for those plans and dreams to be realized. Pelosi and the Democratic leaders are urging Bush to provide more aid to the beleaguered auto industry. Congress bungled the specifics on the $700 billion bailout, and now it wants to extend the bungling to other areas of the economy, beyond the financial institutions. Panic is a dangerous condition, however, while it appears everyone is being conciliatory, or afraid to lose his or her job, there is an opportunity to take radical action. There exists a brief window of time when reconstruction can be enforced on a broken U.S. auto industry.

Here’s the fix:

Dear General Motors, Chrysler, Ford (yes, you too Ford, you’re in trouble, but just won’t admit it), and all suppliers and sub-contractors.

c.c.: UAW (pay attention because this is really going to affect you)

We, the ever hopeful Taxpayers, agree to come to your rescue, but feel it is time for some overhaul. We’ve been embarrassed for long enough. Over the past couple of decades most of your vehicles have looked like they were designed by committees ensconced in the shoebox concept of beauty. We don’t need to address all the other awkwardness, such as your failure to deliver reliability, while Toyota and Honda humbled even the German manufacturers. We are familiar with the rationalizations, and to some degree empathize with your being trapped in untenable labor relationships that have over the years stalled efficiencies. It is time to clear some decks in the management ranks as well as in the labor contract details. The now presents a perfect opportunity.

Please note that neither Congress nor Mr. Paulson will be negotiating the details on deals with each of your companies. Congress has demonstrated it cannot be trusted, and as for Mr. Paulson, we have been less than impressed with his ability to step back and act with objectivity, diligence or any sign of creativity and wisdom. How he became a billionaire is truly the extreme of the American dream waylaid on the road to fulfillment. Reaching dizzying heights of power and wealth with so little …, but enough of that for now. Here is the plan:

Each company will receive the same deal. All you have to do is throw up the white flag indicating that you can’t go it alone, and it becomes activated. There is no negotiation on the broad strokes. A bill will be passed, ensuring that all parties, including all employees, all executives, all Directors, and all related Unions, particularly the UAW, as well as all related contractors, sub-contractors and suppliers, abide by the terms since this will affect all of them very directly. We plan to end the excesses in the executive offices, and in the labor unions that have withered your companies.

We will take preferred share positions at the current market value for funds provided as and when the investments are made. Given the severity of the situation, the preferred shares will carry a dividend premium, we will settle for a total of 10%, and their buyback will also carry a 10% premium.

Considering the current share values, we will end up holding majority positions, which will sit in abeyance awaiting their return to your treasuries. We do not demand board representation, nor do we wish to dictate the agenda.

Since we are primarily interested in a long term success of your companies, we will not demand attached warrants on the preferreds, as other investors might be wont to do. We also recognize that adding to the overhang on the market would not be fruitful. We are not interested in promulgating evidence of greed here, just positive intentions for a significant industry we care to stimulate. Forget about going the loan guarantee route. We already have to borrow these funds, so enough borrowing already. We are anxious to get on with taking drastic action for the revival of your companies. We look forward to launching them into the twenty first century without too much surprise.

All employees, including management and officers, will take a full 25% cut in salary other than those recently hired for “non-core” jobs at $14 per hour or less. The salary cap will be $250,000 per annum, with no bonuses whatsoever. We are dealing with survival here, so whining that your personal overhead is higher than $250,000 will fall on deaf ears, and how can we say this with sensitivity, …you screwed up. Blame your egos for the extravagant lifestyles, and then move to a more moderate neighborhood. You’ll enjoy some peace of mind.

All employee agreements, unionized or executive, will be revisited. We realize that you compete in an international economy, and face competition that does not have the encumbrance of your labor history or your retired labor force. We will be reconsidering and renegotiating health care coverage as well as all 401(k) contribution programs, to bring them into line with the rest of work forces in America. While on the topic, we’re not getting with the program to shift the worker and retiree health care program responsibility from GM to the union, for example. That one smells, and workers will not get the better end of any such deal.

We will revisit the legislation that has governed labor relations, and become intrusive in the function of a prosperous enterprise. Unions abused their privileges, and executives abused their power, taking over-reaching compensation beyond common sense. Both exploited the system to selfish gain, almost killing the businesses. Executives went along with UAW coercion as long as their own incomes were skyrocketing. We are still shaking our heads at the 64% pay raise, Mr. Wagoner gave himself ’06-’07, while GM was hemorrhaging cash and it’s stock was crashing. While he was busy with his own bank account, GM was preoccupied with unproductive plant cutbacks to 80% instead of closing them altogether. The onerous position that carmakers have been subjected to by unions are no longer defendable or rational. Unions have also been taking care of their own senior executives, but their members are staring into the abyss. This will be changed. Oh, yes, and so will the “Jobs Bank” program or other arrangements such as paying “idled” workers almost all their take home pay plus benefits. You can expect us to rescind guarantees such as GM provided to keep all U.AW., U.S. factories operating.

The Board of Directors will experience an immediate restructuring so that we may implement much needed overhaul, and independence to the oversight process.

Accept this in a positive light which will stand you in good stead with the North American car buying public. Seeing some tightening of belts and constraint by unions and executives alike might endear your mobile armada to your primary market. We will not tell you how to run your business but folks, really, could you shrink the number of models? Too many of them look identical. GM, could we talk about your stake in GMAC? You’re supposed to be making cars, not financing homes. We’ll talk.

We would really like all three companies to demonstrate at least some of the vision their competitors have been actuating. We’re not talking about the kind of vision you used when you predicted a strong second half in 2008, but how about some vision on the future of the industry. This is just a “wishful” kind of thing on our parts, but we would be grateful if you could give room to the “vision” thing.

Few familiar with the auto industry would disagree that over-zealous unions have had obvious smothering impact on U.S. companies constraining their dexterity in fast changing markets. Without denigrating their significance to a labor force, we will do our utmost to ensure that common sense prevails in the relationship between unions and the auto industry. We are aware that labor isn’t the overwhelming cost factor, rendering you unprofitable, however, we are very familiar with what almost a century of accumulated bureaucratic strangulation from unions and government have done to your companies. We wish to remove all possible rationalizations and excuses on your road to recovery, and yearn to see it paved with ethical behavior.

Once your companies return to profitability, and our share positions are repurchased, your salaries will be revisited by new, and hopefully independent boards of directors.

We wish you much wisdom, foresight and plenty of good fortune. We also want our money back.

Sincerely.
The Taxpayers.

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• SMALL CARS, A PARADIGM SHIFT FOR AMERICA

America has long had a love affair with the automobile. The fins of the sixties and muscle cars of the seventies remain warm memories of beautiful designs sometimes decorating today's auto shows, private garages, and museums. With the oil cartel enjoying over $111 per barrel revenues, consumers, the very same ones who are now tightening the belt on all spending, are walking past the trucks and SUVs that have for so long been profit staples of automakers. Sales of small cars in April saw increases of 20 to 46 percent depending on the car. This is not an anomaly, but is a major shift in both perception and behavior. It is also the first metamorphosis of this century. More are on the way.

The vast distances between major North American cities, gave rise to the considerable network of highways currently crisscrossing the continent from San Diego to Halifax. Over the span of eighty years, this most extensive and complex road system served the building of a booming society. Whether swelling in 120 degree heat or shrinking in 40 below freezing cold, expressways provided reliable access and transport. Gasoline was abundant and driving was less a chore than a pleasant experience, and smog was only a rear view mirror experience. Going for a drive was even on occasion an enjoyable family outing. Long commutes became accepted and expected.

With the blistering entrance of the 21st century, driving has not only become an expensive experience, it has become a vexing one. We are feeling guilt even before leaving the driveway. We have become convinced of the impact our pollution has had on our environment. Our environment, not someone else’s. For a majority of taxpayers, the dramatically rapid rise in the price of gas at the pump has been measurable week to week, month to month. The dollars are vacating our premises for foreign lands, piling up into palaces and record setting skyscrapers twice the size of the empire state building. Anxieties are further fuelled by line-ups of neighbors losing their homes. Millions of them. This is a new reality. When you blend in the bombardment of news about a bankrupting war in Iraq not going well, our collective consciousness is dragged across a great divide.

The automobile, our second most expensive expenditure that was long the object of our desire, with a fusion of style and function, has lost any residue of romantic luster that might have lingered. We are now seeking functionality. Compact, efficient, economic and utilitarian transportation. This is more than a trend. It is a well entrenched modification of our mindsets and behaviors that will impact auto manufacturers and the oil industry for the long term, and positively stimulate new burgeoning industries in the process. North America is squinting through a paradigm shift, sidestepping around potholes. It’s own industries and manufacturers should rapidly adjust and respond with innovation and creativity.

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