Felix Salmon

Cash for clunkers datapoint of the day

Felix Salmon
Nov 9, 2009 20:12 UTC

Good on the AP for FOIAing the details of how cash-for-clunkers played out:

The single most common swap — which occurred more than 8,200 times — involved Ford F-150 pickup owners who took advantage of a government rebate to trade their old trucks for new Ford F-150s. The fuel economy for the new trucks ranged from 15 mpg to 17 mpg based on engine size and other factors, an improvement of just 1 mpg to 3 mpg over the clunkers.

It gets worse:

In at least 145 cases the government reported consumers traded old vehicles that got better than or the same mileage as the new vehicle they purchased. A driver in Negaunee, Mich., traded a 1987 Suburban that got 18 mpg for $3,500 toward a new Silverado pickup that got only 15 mpg. An Indianapolis driver traded a 1985 Mercedes 190 that got 27 mpg for $3,500 toward a new Volkswagen Rabbit that got only 24 mpg.

In at least 15 deals in nine states, owners of large pickups cashed in old trucks for between $3,500 and $4,500 toward new Hummer H3 SUVs that got only 16 mpg.

I think this is safely the worst policy implemented to date by the Obama administration: it has almost nothing in the way of redeeming features. Let’s hope it was some kind of weird aberration.

(HT Hiskes, via)


HORRIBLE SUMMARY of the program. The impression conveyed is NOT accurate. YES, the most common specific model to specific model swap was F-150 for F-150, and yes, other truck for truck specific model deals were high on the list, HOWEVER, the appropriate conclusion to draw here is that the Category 2 truck market is concentrated in a few models, while the passenger car market is not. Specific to Ford — Fewer than 28% of the number of category 2 or 3 Ford trucks traded in (the F-150 is among these) were replaced overall by a a category 2 or 3 Ford truck. This was a common trade-in (9.1% of all trade-ins), but they typically went with a lighter vehicle. The percentage of category 2 or 3 trucks declined from 19% to 7%. Note that 85% of trade-ins were category 1,2 or 3 trucks (only 15% passenger vehicles), but that 59% of new vehicles were passenger cars. Most trade-ins were category 1 trucks (lighter than an F-150), and most of these people bought passenger cars.

Chrysler: The view from the White House

Felix Salmon
Oct 21, 2009 22:27 UTC

Steven Rattner’s first-hand account of the automaker bailout is self-serving (of course), but still very much worth reading. He’s very much the office-bound technocrat: “we recognized the importance of a trip to Detroit,” he writes at one point, “so in March, several of us made the journey”. Well, yes, that would probably make sense.

At the same time, this financier understands clearly and intuitively that in bankruptcy proceedings, seniority of creditors doesn’t matter:

The lenders were particularly aggrieved that the UAW’s health-care trust, which ranked below the secured creditors, was slated to exchange an $8 billion existing claim for $4.6 billion in notes and 55% of the equity in the reorganized company. While arguably close to a 50% haircut, it was a higher-percentage recovery than we were offering the banks.

The lenders felt that this represented an ideological decision by the Obama administration to tilt in favor of labor and against capital. That was simply not the case. At no time during our months of work did the White House ever ask us to favor or punish any stakeholder.

Many other unsecured creditors — notably, suppliers and consumers holding warranties — actually received 100¢ on the dollar. The fact was, Chrysler had to have workers, suppliers, and customers to succeed and therefore needed to give them more than called for by their rank in the capital structure…

The outcome of the Chrysler restructuring had virtually nothing to do with the heavy hand of government and everything to do with the fact that Treasury was the reluctant investor of last resort.

Every stakeholder did better under our plan than they would have in the alternative: a liquidation, in which the lenders would have gotten far less than the $2 billion they wound up with.

Rattner’s job was to create a viable company, not to maximize recovery for bondholders. If those creditors wanted to put their own new money into Chrysler, and run it themselves, they were more than welcome to. But even the government came very close to simply letting Chrysler fail, until it worked out the magnitude of the knock-on effects on jobs at dealers and suppliers. No one else would put a penny in, and the fact that TARP money was found for the automakers meant that hundreds of thousands of jobs, and billions of dollars, were saved. The creditors really were lucky to get what they got.


I get so tired of ill-informed commenters who are forever stamping their feet and insisting that “the law” is what they think it ought to be. Perhaps they should spend their time explaining the nuances of bankruptcy law to the judge that oversaw the case.

The only thing that ticks me off even more is the fraction of Chrysler and GM bondholders who never really cared about whether reorganization or liquidation was the better deal for _them_–their priority was to make sure that the UAW got screwed worse than they did.

The car deals were a masterpiece, although no one really gets praised for limiting the downside of a catastrophe. Chrysler may still fail in five years or ten, and that doesn’t take anything away from the achievement of not letting them fail in 2009.

Posted by Craig | Report as abusive

Vehicle emissions datapoint of the day

Felix Salmon
Oct 13, 2009 15:45 UTC

Vehicle emissions are a major public health issue. We already know that the best thing you can do if you want to bring your crime rate down is to switch to unleaded gasoline and then wait for 20 years. Now we’re learning that if you want to improve the health of babies (and healthy babies become much more productive members of society when they grow up), simply installing an EZ-Pass tollbooth has a large and significant positive effect: the resulting improvements in congestion and emissions more than make up for any excess emissions from cars crawling through the toll plaza itself.

The negative externalities from driving, then, are significantly greater than the ones that the likes of Charles Komanoff calculates — and those are $160 per trip, in Manhattan. If we want to become a happier, healthier, more prosperous nation, then we have to wean ourselves off our car addiction. It won’t be fast, and it won’t be easy. But it’s profoundly necessary.

(Via Wessel)

Update: The E-Z Pass study can be found here; the link in the WSJ blog is broken. Thanks to Charles Kenny for the pointer.


Changing the mentality of car loving americans would take more work than this. Besides advicing people against buying their own cars, improvements to road infrastructure and remapping of routes so that the most efficient route is taken by motorists can be helpful to the environment as well. But I support your point of wanting us to cut down on our own car addiction too.

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Dangerous hybrid datapoint of the day

Felix Salmon
Sep 29, 2009 15:50 UTC

These tables come from a study organized by the National Highway Traffic Safety Administration, and they’re sobering: they show that hybrid electric vehicles (HEVs) are in some times twice as likely to be involved in pedestrian and bicyclist crashes as their internal combustion engine (ICE) counterparts.

The first table shows 1.2% of hybrids being involved in low-speed crashes with pedestrians, twice the rate of old-fashioned cars; the second table shows 0.6% of hybrids crashing with bicyclists, again twice the rate of noisier cars.



The reason, of course, is that the hybrids are so quiet: bikers and pedestrians use car noises to help them work out which cars are moving and which aren’t. That’s why hybrid manufacturers are now talking about adding vroomtones. Sounds like a good idea!

(HT: Voiland, via Weisenthal)


PS my email is yowza1@myway.com

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Auto lease datapoint of the day

Felix Salmon
Sep 21, 2009 14:38 UTC

From the WSJ:

Last month, Bill Wamsley, a commercial real estate broker in Mill Valley, Calif., hoped to replace his wife’s Lexus sedan with a 2009 Cadillac CTS.

From information Mr. Wamsley collected online he determined a CTS lease would run around $580 a month when all costs were factored in. After some shopping, he found he could lease a Mercedes C300, with roughly the same retail price, for about $450 a month.

General Motors spent so many years as a leasing company with an automaker attached that it must feel weird to see the tables turned like this.

$580 a month is $6,960 a year, or 19% of the $36,560 base price for the Mercedes. $450 a month, by contrast, is $5,400 a year, or 15.5% of the $34,650 base price for the C300 Luxury. The difference, of over $1,500 a year, is significant enough that GM is now faced with an invidious dilemma: either risk blowing up their loan book, or else reduce their prices so much that they’ll never make any money making cars.


I think GM was worried about losing their business customers, who leased there luxury vehicles for tax right off purposes.

The Opel saga

Felix Salmon
Sep 2, 2009 13:01 UTC

A team of seven Spiegel staffers has produced a spectacular account of the big M&A story you’re probably vaguely aware of and find far too complicated to understand — the attempted sale of GM’s European car division, Opel. There’s lots of great stuff here, such as the games of phone tag being played out at the highest levels of the German and US governments (including Angela Merkel, Tim Geithner, and even Hillary Clinton and Dmitry Medvedev); and the spectacular own-goals being scored by the German government (like appointing board members to the German-American trust overseeing the sale of Opel who disagreed fundamentally with the government’s own plans for the carmaker).

Then there’s the even more spectacular own-goal made by at least one bidder, RHJI:

The plan offered by private equity investor RHJI would have been less expensive. It only requires government assistance to the tune of €3.8 billion.

However the fact that Magna was chosen in the end was a consequence of more than just political lobbying. It was also a result of a lack of tact on the part of RHJI representatives at a meeting in the Chancellery.

When Merkel asked Magna CEO Siegfried Wolf why he wanted to take over Opel, he said he believed in the company, in the future of the automobile market, and the value of the Opel brand. Merkel liked that.

Then she asked RHJI CEO Leonard Fischer why he was interested in Opel. The former investment banker answered very matter-of-factly that it was because the German government was assuming the risk. Merkel liked that less.

At this point, the chances of a deal being done before the German elections on September 27 seem to be negligible. After that, the political will behind bailing out Opel might well dissipate, to no particular sadness in Detroit, where important GM board members are asking why Opel need be sold at all. The most likely scenario could well be, now, that no deal will be done at all, and all the high-level politicking will be ultimately for naught.

(Via Hasselback)


Zu Guttenberg is about the only person in Germany to have admitted, though only briefly (he has been forced to change his music since then), that the Magna plan makes no sense and insolvency may be the only viable option. WSJ has reported that GM, besides putting in a billion euros of its own, has apparently been offered loans for another billion from UK, Span and Poland. If, as Spiegel reported, it is true that the German factories cost twice as much as those in Spain, and over four times as much as the factory in Poland, the only way to return to profitability is to close all the factories in Germany. Even if GM were to accept over 100 billion euros from Germany for Opel (as in Hypo Re), this money would simply go down the drain since the German factories are the cause of the problem in the first place. To this one should add the hostility faced by the German government and especially the trade unions.

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The end of Wendelin Wiedeking

Felix Salmon
Jul 23, 2009 23:33 UTC

Last year, I put together an interactive feature for Portfolio.com entitled “Watch Out Below”; it listed nine vulnerable “tall poppies” who were liable to be cut down to size over the coming year. There were three CEOs on the list: Shelly Adelson, Ken Lewis, and Wendelin Wiedeking. Maybe it’s to his credit that Wiedeking managed to hang on longer than the other two. But now he’s been fired, while the other two still have their jobs, even if their reputations are in tatters.

The weird thing is that although Wiedeking’s now gone, the jury’s still out on what he achieved. After all, the tiny sports-car company he transformed over the past 16 years is now being bought for €8 billion on sales of about €6 billion a year. As a hedge-fund manager — which is what he most resembled of late — Wiedeking came spectacularly unstuck, thanks to a liquidity crunch he couldn’t get out of. But the brand he leaves behind him is a strong one, and even with €10 billion in debt it still has significant equity value.

Wiedeking was a classic product of the boom years, and the saga of VW and Porsche will make for many gripping books. There’s no doubt that today’s a low day for him. But I suspect that history will be much less harsh on Wiedeking than it will be on, say, Lewis.


If Wiedeking just take the trouble to contact me I will show him a possible route to place him right on top again. Give him my tel. no. +27 766004227 or my Email

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When TALF displaces TARP

Felix Salmon
Jul 14, 2009 19:47 UTC

Dealbook is making a big deal out of the fact that Chrysler Financial has repaid its TARP loan. But read down to the bottom of the press release, and you find this:

Funds used to make the repayment of TARP were obtained through the completion of a AAA-rated automotive asset-backed securitization (ABS) through the Term Asset-Backed Securities Loan Facility (TALF).

So, yay, the government got its TARP money back. Because some other arm of the government (the Fed) was willing to lend the same amount of money even cheaper, through TALF. This is an improvement how?


Chrysler Financial paid back its TARP loan that placed earning restrictions on top executives with another government-based loan (TALF); it’s corporate welfare no matter how anyone looks at it. What the government should do is audit Chrysler Financial to determine whether the $1.5 billion TARP dollars were actually used for the intended purpose– to fund 85,000 consumer loans for the purchase of Chrysler vehicles. Who purchased 85,000 Chrysler vehicles from January through April of 2009? Chrysler Financial should be forced to name these consumers. Finally, if 85,000 consumers purchsed Chrysler vehicles, why did the company declare bankruptcy?

Cerberus and the government should allow our capitalist system to work and permit Chrysler Financial to go belly-up!!!!!

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Hummer: Too dirty even for the Chinese

Felix Salmon
Jun 26, 2009 13:54 UTC

China is likely to block the acquisition of Hummer by Sichuan Tengzhong:

Hummer, as an expensive, gas-guzzling sports utility vehicle, would not fit in with the government’s policy of encouraging energy-efficient vehicles, the radio said.

Could this be the beginning of the end of China importing carbon emissions from the US?


I find it fairly implausible that a sound Chinese government would give up this sort of opportunity. This would be the very FIRST live, non-dead auto company that would have acquired overseas.

Reading the article, the concern rather seems to be that the buyer does not have the requisite management experience. That can be amended by forcing it to merge with a bigger auto company.

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