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Obama Proposes Significant Rise in Fuel-Efficiency Standards

Fleet average set at 35.5 mpg by 2016

 |  May 20 2009, 10:58 AM

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Yesterday President Obama announced a new proposal being put forward to increase fuel-economy standards across the board. If enacted, the legislation would see the fleet average for passenger vehicles rise to 35.5 mpg by 2016.

Currently automakers are facing an 8 percent increase in fuel-economy standards that would see fleet averages for light-vehicles (cars and trucks) at 27.3 mpg for 2011. Cars would have to achieve a fleet average of 30.2 mpg by that date.

The new legislation would see increases of 5 percent annually after that, with a fleet average of 35.5 mpg by 2016.

President Obama made the announcement at the White House yesterday and was joined by representatives of 10 supporting automakers and the UAW.  In attendance were GM CEO Fritz Henderson, Ford’s Alan Mullaly, Chrysler’s Bob Nardelli, Toyota’s Jim Lentz, Honda’s John Mendel, BMW’s Friedrich Eichiner, Nissan’s Dominique Thormann, Daimler’s Dieter Zetsche, Mazda’s Jim O’Sullivan, Volkswagen’s Stefan Jacoby and the UAW’s Ron Gettelfinger.

If enacted the proposal would reduce America’s fuel-consumption by 1.8 billion barrels of oil.

The agreement was arrived at with the consent of California, which will cease to have its own fuel-economy standards.

The cost of achieving the new fuel-economy standard is expected to be roughly $600 per vehicle, a tab that will no doubt be passed along to the consumer.

[Source: Automotive News]

 |  Apr 30 2009, 1:18 AM

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President Obama is expected to announce tomorrow that Chrysler will in fact file for bankruptcy; according to a report by Bloomberg. The Wall Street Journal, however, says that Obama currently has two speeches drafted for tomorrow’s press conference: one if the struggling automaker files for Chapter 11, and one if it doesn’t.

The Chapter 11 option seems the most likely at this point as it would make the alliance with Fiat a smoother process.

The only way Chrysler will avoid the “B” word is if the companies that it is indebted to agree to accept a cash offer in exchange for that debt. That may sound like a more than fair trade, were it not for the fact that the cash value is just $2 billion, in exchange for $6.9 billion in debt.

While the federal government has made an agreement with the largest lender, other major players, including Oppenheimer Funds, Perella Weinberg Partners and Stairway Capital are holding out. According to David Cole at The Center for Automotive Research in Ann Arbor, MI, if those lenders have insurance policies that cover them completely in the case that Chrysler fails, then it’s in their best interests to see that bankruptcy is the solution.

President Obama, speaking on the topic at a Town Hall meeting in St. Louis today said that if bankruptcy happens it will be “real quick.”

But with billions on the line and numerous big players involved it’s not clear how even the Federal Government could stop the restructuring of Chrysler from taking years in court.

The Washington Post has reported that a Chrysler/Fiat alliance would see Chrysler CEO Bob Nardelli ousted from his current position in favor of an executive from Fiat.

 

[Source: Automotive News]

CAW Burns Nardelli/LaSorda Letter and Responds With Its Own

CAW President Ken Lewenza calls Nardelli/LaSorda letter "offensive"

 |  Apr 20 2009, 8:42 PM

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The Canadian Auto Workers union, after burning the letter written by Chrysler CEO Bob Nardelli and joint-president Tom Lasorda, has now responded with its own statement.

CAW president Ken Lewenza denies that a $19 labor gap exists between Canadian and U.S. workers and refuses to re-negotiate a contract that has already been re-neogotiated. 

Lewenza calls the $76 per hour wage “inflated and artificial” and says that it, “includes many non-relevant factors, such as expenses associated with retirees who have not worked at Chrysler for years, and payroll taxes which are paid to government not to workers.” He continues: “Perhaps most galling of all, Chrysler’s number even includes the proportional cost of downtime and lay-offs. In essence, we are being ‘charged’ for our own unemployment. The best way to reduce that artificial $76 number is to put Chrysler workers back to work: that alone would reduce hourly costs by several dollars per hour.”

Regardless of how you view the statistics, Lewenza makes two other strong points. First, he says that Toyota and Honda (both of which are non-unionized) have made it well-known that they match wages and other benefits with unionized automakers. In other words, the wage that Chrysler employees are making is fair because it’s what the other companies are paying their staff. Second, Lewenza says that the bond holders haven’t had to make any concessions at all.

Unfortunately for Lewenza and the CAW, it doesn’t matter what they say and it seems that if the $19 gap isn’t closed then Fiat won’t partner with Chrysler, the federal governments in both Canada and the United States won’t keep the cash flowing. As a result Chrysler will be forced into bankruptcy, something Lewenza calls, “an increasingly likely prospect.”

 

Read the full letter after the jump:

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