“Think about it. If you are a member of the union right now, you’re spending all your time negotiating about health care. You need to be spending some time negotiating about wages, but you can’t do it,” he said.

In fact, the UAW locked itself into a contract limiting wages and changes to health care, without the ability to negotiate with a threat of strike, until 2015. These stands were agreed to by the union at the prodding of the Obama administration, which demanded that union autoworkers accept lower wages — as a condition to the bailout that saved Lordstown — to match non-union workers at Toyota plants in Kentucky and Honda plants in Ohio.

Even so, Lordstown is something of a success story for both the UAW and GM, and Obama’s remarks were punctuated with enthusiastic applause.  After winning deep concessions from the UAW in 2007, GM agreed to invest $500 million to retool the plant to make a new fuel-efficient small sedan, the Chevy Cruze.

Obama had nice things to say about the Cruze, which GM expects to get more than 40 miles-per-gallon in highway driving.

“I just sat in the car,” Obama said of the Cruze. “I asked for the keys. They wouldn’t give me the keys. I was going to take it for a little spin. But it was nice sitting in there. It was a roomy car.”

Consumers will not get the keys to a new Cruze, either, until the middle of next year when it arrives in showrooms. In the meantime, Lordstown is stuck building the Cobalt, a budget-minded Chevy and vestige of the “old GM.” 

Consumer Reports in its October edition branded the Cobalt as one of the five “cruddiest cheap cars” on the market.

(Writing by Kevin Krolicki. Reuters photo by Larry Downing.)

Manitowoc Co is set to be the third U.S. manufacturer dropped from the Standard & Poor’s 500 index this year — but the brains behind the benchmark said the shift does not reflect a desire to soft-pedal the sector. 

“Our general concern about sectors is the proportions of sectors in the market and the index should be close to one another, and close is around a percentage point or so,” said David Blitzer, an S&P managing director who chairs the index committee. “Given that the 500 is 75 to 80 percent of the total market cap of the U.S. market, we’re never going to be too far off.”

S&P said late on Monday that it would remove Manitowoc, a maker of cranes and ships, from the benchmark S&P 500 after the close of trading on Aug. 31, noting that its market capitalization ranked it last in the group.

Manitowoc will be replaced by Cardinal Health Inc spin-off, CareFusion Corp, a medical products company.

In March, Tyco International Ltd was dropped from the index, followed by Ingersoll-Rand Co in June. They were replaced by New England’s largest utility Northeast Utilities and utilities contractor Quanta Services Inc.

But Tyco and Ingersoll had something in common besides their sector — they both reincorporated from Bermuda to Europe, making them ineligible for inclusion on this list.

“Two of the three industrials that left did it themselves,” Blitzer said.

Leaving the index — whose members are widely held in a variety of mutual and index funds — can take a toll on a stock’s performance. Manitowoc shares were down 7 percent at $6.35 on Tuesday, on a day that U.S. stocks were mostly higher.

But that penalty has not deterred some companies’ interest in making a move, in the face of concerns that the Obama adminsitration may crack down on incorporations in countries including Bermuda seen as an effort to avoid taxes.

Cooper Industries Ltd in June said it planned to reincorporate to Ireland, joining Ingersoll, saying that lower taxes and regulatory costs would help its bottom line.

But Blitzer laughed at the idea that S&P could even try to muscle any single sector out of its benchmark index.

“I don’t think that we could do it, not that we’ve ever tried,” be said. “It just wouldn’t work.”

(Corrected - Bank of America did not purchase Countrywide early this decade)

Now that the nation’s top public servant is wielding The Donald-like powers over chief executives of bailed-out companies, expectations are high that more heads will roll, and Bank of America CEO Kenneth Lewis is looking like the next contestant on a new economic prime-time drama: The Executive.

Rick Wagoner, ousted as General Motors CEO, had spent more than three decades in the company and had been in the driver’s seat for most of the last one. He also presided over the era of the energy-unfriendly Sport Utility Vehicle and is criticized for sticking with trucks far longer than he should have.

Lewis has been Bank of America CEO for about eight years. He bought CountryWide, the biggest lender after the market went crazy for real estate and was ultimately forced to buy Merrill Lynch as the salad days of Wall Street wilted.

By contrast, Citigroup’s Vikram Pandit has been running things for just about long enough to endure the worst of the crisis, and AIG’s Edward Liddy was installed by the government. Perhaps it’s the longevity of characters like Wagoner and Lewis that make them seem so deserving of a presidential pink slip.

Should investors brace for a wave of executive firings? Certainly any chief with enough stripes to remember the good times and who had his hand out for government aid is looking vulnerable.

It is interesting to recall the argument behind AIG’s odious retention bonuses: these are the guys who got their companies into those messes; they should be the best positioned to get them out. If Lewis does get a presidential veto, that argument will be pretty much lost.

Deals of the Day:

* Raven Russia, a property company focused on warehouses in Russia, agreed to acquire property developer Raven Mount Group for 54.9 pence per share, or 60 million pounds, the companies said.

* Spains’ Santander said it had agreed to sell its 32.5 percent stake in Spanish oil company Cepsa to Abu Dhabi fund IPIC at 33 euros per share.

* Hungary’s government said it is injecting fresh funds into FHB, raising its stake in the mortgage bank beyond 40 percent and helping it compete better with foreign rivals in its home market.

* Australian miner OZ Minerals said it received an alternative rescue bid from Minmetals, after Australia last week blocked the Chinese state-owned firm’s $1.8 billion bid on national security grounds

* A Canadian pension fund has offered $930 million to buy Australian investment firm Macquarie Communications Infrastructure Group, sending MCG’s shares up over 58 percent.

(PHOTO: Donald Trump speaks during a news conference at an Aberdeenshire Council inquiry into the plans for his golf course resort in Aberdeen, northeast Scotland June 10, 2008. REUTERS/David Moir)

It’s hard to imagine a less free-market initiative than having Washington approve executive compensation packages. But by the same token, the astronomical fees charged by many company chiefs would seem to defy laws of gravity, though not necessarily nature. Top athletes know the score: executive compensation has a relational value that outweighs its nominal one. That is to say, it’s not how much you get paid that’s important; it’s whether your paycheck is bigger than your competitor’s. That’s how Goldman Sachs CEO Lloyd Blankfein can walk away with a $65 million pay check in 2006. This is a nonsensical amount of money - more than could be spent by the family Blankfein over several generations. But for Goldman Sachs shareholders, it represents a trophy.

The Senate is doubtless trying to take a deep breath after the House passed legislation aimed at taxing bonuses of AIG and other recipients of government aid. Over at the White House, details of a plan to go Dutch with private investors on the bill for the years-long rave that ended with Wall Street’s crash last year are due later today. And speaking of Dutch, the Finance Ministry in The Hague said it would tackle bonuses at companies receiving government support. And big Dutch bank ING said it was asking some staff to give back their bonus payments for 2008.

The Netherlands and the United States are in similar ways two of the biggest boosters of commercial capitalism in the history of Western civilization. Clearly, they should be taking the lead in rewriting the theory of financial Darwinism.

Deals of the Day:

* Suncor Energy, Canada’ No.2 oil company, agreed to buy rival Petro-Canada for about C$18.43 billion ($14.86 billion) to expand its oil sand reserves and create the country’s biggest energy group.

* Britain’s BG Group has acquired 70 percent of Australian coal seam gas producer Pure Energy and has extended the offer period in its agreed A$1.03 billion takeover bid for Pure.

* India-focused mining group Vedanta Resources plans to pay $34 million to boost its stake in Madras Aluminium Company Limited to 93 percent from 80 after an offer to minorities shareholders.

* Australian miner Straits Resources will sell part of its coal and salt assets to Thai energy firm PTT PCL in a deal worth about A$500 million ($343 million), a source familiar with the deal said.

* Palestinian Prime Minister Salam Fayyad said that a deal for Kuwait’s Mobile Telecommunications Co to take a major stake in Palestinian operator Palestine Telecommunication Company (PalTel) could be signed in the coming days.

* Abu Dhabi National Energy paid $320 million for a 50 percent stake in Marubeni Corp’s Caribbean power portfolio, which it had agreed to purchase in February, Taqa said.

* Bank Muscat said it had sold about 81 percent of its stake in India’s HDFC Bank and earned about 39 million rials ($101.3 million) in pre-tax profit from the sale.

* Bahrain-based lenders Al Salam Bank and Bahrain Saudi Bank said on Monday that their planned merger, which would create a bank with combined market value of $400 million, is on track.

* Private equity groups Hellman & Friedman, Bain Capital and TPG have shown interest in buying the iShares unit from British bank Barclays, sources familiar with the situation said.

(PHOTO: Queen Beatrix of the Netherlands baptizes tulips named “Spring Garden” during the opening of the 60th edition of the International Keukenhof Flower Show in Lisse March 18, 2009. REUTERS/Robin van Lonkhuijsen/United Photos)

The drums of consolidation in Big Pharma were beating loudly after Pfizer bid for Wyeth in January. And as Merck and Schering-Plough were already teamed up on key drugs, the deal they announced this morning was hardly a shock. Though analysts said the pact has lots of logic to sell it — the companies are practically neighbors in New Jersey — the market is playing defense, so any excitement about Monday merger mania was quickly quashed as the economic Thorazine kicked in.

Long the preferred defensive play in a downturn, Big Pharma has been suffering along with the rest of the market as investors unwind the bull-market era and dump stocks for treasuries in the face of the biggest surge of new government debt issuance in living memory. Plus, consider that just last week the Obama administration was marshaling the president’s executive might to make good on a campaign pledge to tackle soaring health-care costs. Considering the environment, the strength of logic might not be enough to cast the Merck/Schering-Plough deal as anything other than a defensive necessity.

Shareholders are acting defensively as well. Merck shares were retreating in premarket trade, indicating a lack of confidence that the synergies of the merger will overcome what ails Wall Street.
Deals of the Day:

* Iceland’s financial watchdog said it had taken over investment bank Straumur Burdaras <STRB.IC>, the last major Icelandic bank left standing after the country’s financial collapse in October.

* Four global spirits makers, including Diageo, have shown interest in acquiring stake in India’s United Spirits, the world’s third-largest spirits maker, the Times of India said on Monday, quoting agencies.

* Swiss logistics group Kuehne & Nagel has agreed to buy J. Martens Holding AS, a Norwegian service provider to the oil and gas industry, it said.

* India’s Satyam Computer Services said it was commencing a competitive bidding process to select an investor to acquire 51 percent stake in the fraud-tainted outsourcer.

(PHOTO: A general view shows a logo on the Merck facility in Rahway, New Jersey November 28, 2005. REUTERS/Jeff Zelevansky)

(fixes typo in third paragraph)

Talk about the end of the salad days. The White House is pledging action against “irresponsible” bonuses for executives at bailed-out Wall Street companies and Senator Claire McCaskill has proposed a law to cap their compensation to $400,000 a year.

Masters of Wall Street should not make more money than the president of the United States, she argues, at least not until they wean themselves from government aid. So what’s a Wall Street executive to do on only $400,000 a year? Here are some ideas - precluding paying rent, buying food, putting gas in the car or getting the poodle a trim:

REAL ESTATE: Thank goodness the property market crash has opened some affordability gaps for the newly upper-middle-class executive. The prospective banking executive could pick up a one bedroom, one bathroom co-op condo on West 45th street, or see if she could get a mortgage on Bernard Madoff’s Montauk $3.3 million East Hampton estate. In this market? Unlikely. Plus, agents will tell you the market price is actually much higher. Pity.

OFFICE OR HOME DECORATION: He could spend a year’s salary on four painted portraits of billionaire investor Warren Buffet. In May, performance artist Michael Israel painted a portrait of the head of Berkshire Hathaway in 10 minutes flat. Six months later, a Minneapolis executive bought it for $100,000 in an eBay auction, with the proceeds going to the non-profit Girls Inc program.

PARTY PARTY PARTY: The future titan of Wall Street may not be able to afford Rod Stewart, who played at Steve Schwarzman’s big birthday bash in 2007 for $1 million, but he could gorge on 10,000 or so of the Blackstone chief’s favorite crab claws, which were going for $40 per claw back in the heyday of high finance.

SUPERBOWL: StubHub had a Super Bowl luxury suite going for $83,340, so a bank exec could still easily play the part of overpaid sports junky and still have more than $300,000 to lose on the outcome of the game. If he wants to be a bit more frugal, club premium seats are going for $10,511 a pop. If ego demanded, he could afford 4 seconds of TV advertising.

GETTING OUT OF DODGE: The cost of operating the private jet fleets, while difficult to estimate, could still be managed by the bank exec of tomorrow. NetJets Inc, owned by Warren Buffett’s Berkshire Hathaway, was selling fractional ownership shares of private planes for a minimum of $406,250 back in December, so that’s out, but through Marquis Jet, it is possible to purchase 25-hour increments of time in NetJet planes for $115,900, or roughly $4,600 an hour. Virgin Galactic was offering tickets to space for $200,000 in 2006 through Park Avenue travel, but like the plan to cut Wall Street executive pay, space travel is just an idea at this point.

MAKING IT BACK: Lloyd Blankfein, CEO of Goldman Sachs, earned more than $68 million in 2007. At $400k it would take him 170 years to get back to the good old days.

OTHER AFFAIRS: Spitzerish peccadilloes? Shoe collections? A few fine bottles of wine? How would you deal with a crummy $400,000 day job on Wall Street?

Global stocks rose on Tuesday night as Barack Obama’s history-making victory became apparent.

“People are hoping that we are seeing a path here to a resolution of one key uncertainty on the investment scene; who will be the leader of the free world,” said David Dietze, chief investment strategist at Point View Financial Services, Summit, New Jersey.

U.S. Treasury prices fell as the safe haven bid waned with global stocks rising. The 2-year note’s price traded down 3/32 for a yield of 1.44 percent.

“Money is coming out of the very shortest end (of Treasuries) and going into stocks and spread product.” Dietze said. “People are just more willing to invest in anything as opposed to being on the sidelines,” he said.

New Yorker business writer James Surowiecki has more:

It’s been interesting to watch the after-hours trading in the S. & P. futures, particularly around 9:30 P.M., when CNN and Fox both called Ohio for Obama, effectively (I think) clinching his victory. The announcement made essentially no impact on the futures market, which I think suggests that investors were already collectively expecting an Obama victory. So does the fact that in the last half hour the futures, which had been down earlier in the session, kept rising, so that they’re now actually up from today’s close. In other words, there’s no sign that investors are panicked at the thought of an Obama Presidency.

Of course, the market also knows at this point that it’s unlikely that the Democrats will get sixty seats in the Senate, which it’s fair to say many people on Wall Street were really concerned about. So that may have something to do with investors’ relative sanguinity. As for world markets, they’re still rallying, with Australia up almost two per cent and Hong Kong up 5.5 per cent. The Japanese? They’re still on their lunch break, but the Nikkei was up almost three per cent this morning. So at the moment, the global rally continues.

PE Hub’s Dan Primack writes:

Mitt Romney is probably just days away from being named John McCain’s running mate, and the Democrats are already taking shots based on his time running Bain Capital. During a press conference earlier today in Denver, Obama campaign manager David Plouffe referred to the former buyout kingpin as a “job killing machine in business” who “has been proficient at using tax havens in places like the Cayman Islands that Americans have become increasingly tired of.”

It’s certainly true that Bain laid off portfolio company employees during Romney’s tenue. It’s also certainly true that Bain hired portfolio company employees during Romney’s tenue (particularly at the earlier-stage companies).

So Plouffe was only telling a half-truth, although it’s one we should expect to hear over and over again. This will be particularly true if Romney’s people keep avoiding any actual discussion of Bain Capital, as his spokesman did in response to Plouffe’s comments.

As I’ve written before, I’m thrilled by the prospect of Romney as a vice presidential candidate. Not because of my political biases, but because it gives me something to write about for the next few months. But his former private equity colleagues should be very nervous about what his candidacy would mean for their own reputations and future regulation. The industry was dragged through the mud most of last year, and has largely been forgotten ever since (except in Michigan, thanks to Cerberus/Chrysler). A McCain-Romney ticket will bring it all back with a vengeance.