When The Government Owns GM...
... the other auto-makers are not going to be treated very fairly.
Senior officials at the U.S. Department of Transportation have at least temporarily blocked the release of findings by auto-safety regulators that could favor Toyota Motor Corp. in some crashes related to unintended acceleration, according to a recently retired agency official.George Person, who retired July 3 after 27 years at the National Highway Traffic Safety Administration, said in an interview that the decision to not go public with the data for now was made over the objections of some officials at NHTSA.
"The information was compiled. The report was finished and submitted," Mr. Person said. "When I asked why it hadn't been published, I was told that the secretary's office didn't want to release it," he added, referring to Transportation Secretary Ray LaHood.
Welcome to the corporate state, Obama-style. Not to mention some old-fashioned bureaucratic CYA:
Since March, the agency has examined 40 Toyota vehicles where unintended acceleration was cited as the cause of an accident, Mr. Person said. NHTSA determined 23 of the vehicles had accelerated suddenly, Mr. Person said.
In all 23, he added, the vehicles' electronic data recorders or black boxes showed the car's throttle was wide open and the brake was not depressed at the moment of impact, suggesting the drivers mistakenly stepped on the gas pedal instead of the brake, Mr. Person said.
"The agency has for too long ignored what I believe is the root cause of these unintended acceleration cases," he said. "It's driver error. It's pedal misapplication and that's what this data shows."
Mr. Person said he believes Transportation Department officials are "sitting on" this data because it could revive criticism that NHTSA is too close to the auto maker and has not looked hard enough for electrical flaws in Toyota vehicles.
"It has become very political. There is a lot of anger towards Toyota," Mr. Person said. Transportation officials "are hoping against hope that they find something that points back to a flaw in Toyota vehicles."
The existence of this report is one reason, suggests Walter Olson, why the Democrats in Congress (abetted by the NY Times) seem in an enormous hurry to pass a new auto regulatory bill. After all, automobiles have been sold in this country for only about 100 years, so every day counts in getting new regulatory infrastructure in place
The recall of millions of Toyota cars and trucks because of persistent problems of uncontrolled acceleration has exposed unacceptable weaknesses in the regulatory system. These weaknesses are allowing potentially fatal flaws to remain undetected. Democrats in Congress are pushing legislation to improve regulation and oversight of auto safety. It should be passed into law without delay.
As Olson points out, the NY Times has bent over backwards to ignore recent NHTSA findings in its reporting. This in particular is the enormously flawed logic of the regulator:
N.H.T.S.A. could fine Toyota only $16.4 million for delays in revealing problems with defective accelerator pedals that left the throttle open after being released. That's pocket change for a company of its size.
Pay no attention to that free market behind the curtain. The billions of dollars this acceleration problem has cost Toyota in recalls, repairs, lost sales, and damage to reputation are irrelevant -- only fines imposed by the Administration (and torts by its allies in the litigation industry) matter. And if the same problem beset government-owned GM, anyone want to bet what the penalty would be? They would probably get a new bailout from Obama to pay for the recall costs. In fact, even without the NHTSA findings, this Toyota problem is really no worse in terms of incidence rates or costs than any number of other recalls by US manufacturers. The only difference is the media attention lavished on the problem.
Sameer Parekh:
just what we need, for cars to cost as much as airplanes.
July 31, 2010, 11:45 pmrichard:
Toyota shares were trading in Q3 last year for around $90 a piece. After the accelerometer incidents end 2009/beginning 2010 it dropped sharply, but recovered partly. It is now trading for $70. That's about 25% off.
Total market cap is today $110b, so 25% is around $30b.
This is not paid by Toyota executives but by Toyota shareholders. That's ordinary people saving for their pension. Toyota is after Samsung the 2nd biggest company in Asia
http://ichart.finance.yahoo.com/z?s=TM&t=5y&q=l&l=off&z=m&a=v&p=s&lang=en-US®ion=US
August 1, 2010, 12:37 amVal:
Sameer - you're just looking at it backwards! We are providing equality for all by making airplanes cost as much as cars! It's just easier to move the price on the car side of the equation.
August 1, 2010, 9:10 amTed Rado:
To think we threw out George III so we could have the idiots we have now running the country!! Washington must be rolling in his grave at 3600 RPM.
August 1, 2010, 11:49 amIgnoramus:
Obama is the new Warren Buffet !
GM had planned to file for an IPO in mid-August, at the same time it announced its 2Q earnings. Now it's saying it'll file with the SEC "by the end of the year. "
The USA put $50B into GM, and got a $7.0B loan repaid, so we're still in $43B for a 61% stake. Thus, GM needs about a $70B valuation for the USA to break-even.
If Toyota is worth $110B and Ford is worth $40B, how much is GM worth?
GM has advantages over Ford: a larger presence in emerging markets, and substantially less debt after the Obama-led bankruptcy reorganization. Thus, GM had interest expense of only $337mm in 1Q 2010, while Ford had $1.7B.
But Ford earned $2.1B in 1Q 2010, while GM only earned $865mm, on sales of $28.9B and $31.5B, respectively. Had GM not gotten its debt extinguished in bankruptcy -- which substantially eliminated its interest expense -- it would have lost money in 1Q 2010.
Both companies had sales momentum going into 1Q 2010. I don't know how much of this came at Toyota's expense.
But auto sales have been slipping in 2Q 2010. GM saw sales slip 10% in June, after an 8% drop in May. The sharpest drop was in the Gulf Coast region.
JPMorgan was said to have won a co-manager role -- along with Morgan Stanley -- after it said a GM IPO could go for as much as $90B. Sheeeet, what bankers will say in their bake-off presentations.
Use of IPO proceeds would be mostly to make a payment of more than $10B to to the UAW funds -- I kid you not.
Valuing GM is tricky, but I can say that $70B was never in the cards. With half the earnings of Ford -- and the USA, UAW and Canada as majority partners -- I can't see how you'd value GM as worth much more than Ford. Not unless you think they're going to sell a million Chevy Volts.
So I'd mark down our USA investment in GM by around 50%.
August 1, 2010, 4:43 pmVal:
GM did not repay a loan... Unless you count on them taking one loan and paying off part of another with it - and the really fun thing is that they are both from the same lender!
August 1, 2010, 9:54 pmADiff:
Would anyone with any sense actually buy an automobile made by a government owned manufacturer?
Not I.
August 2, 2010, 5:09 pmJohn O'Hara:
You don't get it, GM is gunna build every American their own "free" car! They're gunna be called Trabants!
-- John O.
August 2, 2010, 5:32 pmjay:
A bit off topic, but look at this story which shows what happens when government uses 'licensing' to protect the status quo:
http://jalopnik.com/5604559/how-one-good-samaritan-was-arrested-for-driving-drunks-home
They guy starts a service to help make sure people who have been drinking have a safer alternative. Unfortunately the government is more interested in protecting the 'licensed' taxi business than safety on the streets.
August 5, 2010, 5:32 pmjay:
When the government owns GM you get a bureaucrat for CEO.
GM CEO Ed Whitacre: "I don't know, I'm not a car guy..."
http://jalopnik.com/5606649/-ed-whitacre
August 6, 2010, 4:21 pm