After the substantial rhetoric regards the nomination of a theoretically all knowing, all powerful Saviour figure in the form of a 'Car Czar', it appears that the the new Administration has concluded that a panel-type structure would be better suited to the task of steering a U-turn for US Autos. Having sought-out candidates that ideally imbued the dual capabilities of Lee Iaccoca & Jack Welch the annals of the Automakers, Wall Street and Government could not deliver.
Theoretically, natural candidates would have been the ex-Auto executives who migrated to PE. The likes of Jacques Nasser at (JP Morgan's) One Equity Partners, Tom Stallkamp at Ripplewood Holdings and Cerberus' David Thursfield and Wolfgang Bernhard (now recently returned to Daimler). But of course of those a number will have obviously aligned interests. Perhaps the best nominee would have been Nasser given his 7 year remoteness from operating as a direct (ex Ford) CEO and his (additionally) more visionary strategic competence. But this seems an academic possibility now.
Though there is a wealth of discipline-centric talent, the very fact that such people move to PE firms as advisors after climbing the automotive corporate ladder, suggests that this convention (at such a rarefied altitude) infact creates the chasm of cross-disciplinary ability that should exist between/across these macro-economic worlds.
And at a time such as now that convention appears to be a major draw-back.
As for the PE-sourced names, the re-structuring experts who might have taken such a post reportedly directly under Paul Volcker are conspicuous by there absence. That is not surprising, the arenas of financial engineering and auto-engineering are, as stated, unfortunately worlds apart. And from an intrinsic professional PE perspective, given this 're-birth' period of historical proportions, why would they wish to place themselves as the constrained central architect of the hurricane, when being external means potential access to the valuable flying debris? [However, there is still speculation that Steven Rattner of Quandrangle Group could advise without such a high-public profile].
Thus, without such apparent 'super-men' with requisite breadth and depth of understanding of Autos and Finance, the necessary broad spectrum of knowledge required can only be drawn from a panel. And, seemingly after the apparent political-positioning between Geithner and Volcker, that panel will now propose to (Treasury Secretary) Tim Geithner and (White House National Economic Council Head) Larry Summers.
As a key component of the Presidential Task Force, ex-Lazard's Ron Bloom will be helping to lead the way with Stephen Girsky as his No.2; and pertinently not donning the 'Car Czar' title. That title is unfortunately seen by many more as a Crown of Thorns, given present abysmal industry conditions reflected by the diametrically opposed ideologies of stake-holder parties, which need to be converged and aligned by the lead negotiator. US Autos appears to remain a very 'hot-potato' that few if any are willing to wholly risk their professional reputation upon.
Today of course is an intermediate deadline date for progress reporting on the Big Three's turnaround plans, prior to the full recommendations at March-end. Given their relative independence, seeking only fall-back financing and comparatively good corporate housing-keeping, Ford's details should notionally be waved through. It is of course GM and Chrysler that remain the real headaches for Congress, with sitting closely in the background the Supplier-sector's recent remonstration for $25bn in subsidies, soft-loans and loan guarantees.
As for GM and Chrysler a credible road-map forward which is amenable, or made prescriptive, to stake-holders must be formulated as both burn through the substantial cash drip-feed previously alloted in a 1st round and recently requested as a 2nd call. [GM: $18bn + $13.4bn = $21.4bn / Chrysler : $4bn + $3bn = $7bn].
That roadmap will need to co-align the interests of all incumbents. Presently that indicates that the central 'creditor' parties may need to recede and take a major 'hair-cut' on their positions if they are to maintain their interests in ongoing concerns. But of course Corporate Bondholders and UAW members have very different ultimate aims.
The former (generally institutionals) depending upon their expectations of the 'liquidity freeze' time-line may well wish to seize assets to in turn liquidate for much needed balance sheet cash; but that could back-fire as a PR disaster – short term gain for long-term pain. As a tabled compromise they seek senior/preferred equity for holding the risk, in leu of coupon and goodwill for assisting in heavy reduction of public debt levels needed by government.
The latter, the UAW, should be far more predisposed the need to maintain GM and Chrysler status quo if the VEBA arrangement previously agreed that swaps 'legacy' debt-for-equity is to be of ultimate worth.
At present it looks as if the Geithner-Summers partnership will be the prime evaluators and negotiators, advised in turn by the Auto-Committee. But much of course depends upon the full and final recommendation plans delivered as to whether GM and Chrysler can indeed create viable futures leaning upon government and foreign auto-sector partners as crutches for the near & medium term.
At present the obvious question is who is properly qualified assess those plans? The Committee is apparently still being formed yet the March-end deadline, and the possibility for Chapter 11 proceedings, looms ominously.
The yesteryear formulation of the American Motor Corporation (AMC) out of failed firms will be a case study from the past lodged in the back of observer's and player's minds. AMC's marginalised product line and unsustainable business plans led to its eventual demise and put the firm, and the legendary Jeep brand, into the hands of Renault (and the French Government) for a time.
At present the likelihood of an amalgamated GM-Chrylser looks very remote given the distinct lack of direct benefits and numerous disadvantages. (That is unless Obama et al seek to create an enlarged Tier 0.5 manufacturing model that would migrate the VM's assets and liabilities to Visteon and Delphi backed with government guarantee? However, that could smack of protectionism go against US investor interests given the accordant covenant conditions (& de-rail Wilbur Ross' holdings strategy) and so could be the US's industrial undoing.
So for the present, that Autocratic Superman looks to be not American but instead FIAT's Marchionne. Thus Chrysler looks to have a light at the end of the tunnel, even if a painful one for Cerberus and Daimler seeing their equity stakes dramatically de-valued. The real question still pertains to GMNA. The General in North America has already been demoted in the eyes of the consumer, but will government decide to ultimately disseminate his ranks? Better a slimmed, re-allocated and able force than over-populated sedantary starvation.
If GM's plans don't convince Geithner, Summers et all, they will need to balance politically 'off-set auto-initiatives'. Off-set in as much as that they will need to both create a new US industrial format that convinces present stakeholders and critically create confidence for foreign VMs and non-domestic investors.
The ideology of an American Motors needs to be born again, but perhaps in a very different guise.
