3-20-2009
News on the International Trade Front
The Senate this week confirmed former Dallas Mayor Ron Kirk as the new U.S. Trade Representative. As the new USTR, Mr. Kirk faces some high-profile unfinished business left behind by the Bush Administration - including the World Trade Organization Doha Development Agenda trade negotiations; deciding what to do with bilateral free trade agreements with Colombia, Panama and South Korea opposed by many Democrats; and a new trade row with Mexico resulting from the Obama Administration’s decision to end a program allowing Mexican trucks to operate in the US market.

The U.S. was required under NAFTA to grant Mexican trucks full access to its highways by January 2000, but domestic opposition led U.S. legislators to delay the opening until a pilot program allowing some trucks was instituted in 2007. The U.S. ended that program last week — a move that Mexican Economy Secretary Gerardo Ruiz Mateos called "wrong, protectionist and a clear violation" of NAFTA. Secretary Mateos announced retaliatory tariffs on over 90 U.S. products valued at over $2.4 billion. The retaliation list does not include autos or auto parts. President Obama will visit Mexico April 16-17. (Molnar)

Grasstops Campaign Launched in Support of Chrysler's Viability Plan
This week plant managers and top dealers began outreach efforts in support of the viability plan and the US Treasury decision anticipated for March 31st. The efforts include letters to the Presidential Task Force, Congressional Leadership and state and local officials as well as targeted engagement with media. EAPP and the plants are also canvassing the local chambers of commerce and the nonprofit and educational communities to encourage them to voice their support for Chrysler's plan. (Montoya)

Treasury Announces Support Program for Suppliers
On Thursday, the Treasury Department announced a new Supplier Support Program. The program will provide suppliers with access to government-backed protection that money owed to them for products they ship will be paid no matter what happens to the recipient car company. The program will be run through Chrysler and GM. Suppliers to Chrysler and GM that agree to maintain qualifying commercial terms will have the opportunity to request this government backed protection. Treasury has made available up to $5 billion in financing under the program. (Molnar)

US Senators Write Letters in Support of TALF Revisions
Senators Stabenow, Bond, Schumer, Levin, Carper, Brown, Kohl, and Voinovich wrote joint letters Wednesday to both the Federal Reserve and the Department of the Treasury calling for revisions to the TALF program. In the letter, the senators stated that the program “was intended to effectively assist auto finance companies who support a critical sector of our economy,” and for it “to work as intended, it must be modified in order to provide financing for dealer floorplans.”

Auto finance companies have largely been excluded from the program due to a stringent requirement that the company’s paper have a AAA rating. The Treasury Department has previously discussed revising the TARP program instead of TALF to help restore liquidity to auto finance companies. We will continue to monitor any changes to either program. (Ellis Rochkind)

Fleet modernization bills proposed in U.S. House
This week, two bills were filed in the House of Representatives intended to modernize the vehicle fleet.

Rep. Sutton (OH-D-13) proposed a bill that would provide government-funded vouchers to consumers who turn in vehicles eight years old or older to be scrapped. The consumer can use the vouchers, which are worth between $3,000 - $5,000 to purchase vehicles made in North America. The amount of the voucher varies with the fuel economy and where the vehicle is assembled (vouchers are higher for vehicles assembled in the US). Cars must achieve at least 27 mpg highway, and trucks must achieve at least 24 mpg highway, to be eligible for a voucher. Beginning in MY 2011, the vouchers would be eligible only to those consumers purchasing a plug-in or battery electric vehicle. Those vouchers would be worth $7,500.
Rep. Manzullo (IL-R-16) proposed another bill that would provide $5,000 to any purchaser of any vehicle, with no scrappage or fuel economy requirements. After the first six months, the voucher would drop to $2,500. The program would expire in two years. (Hennessey)

New R&D Program Announced in Canada
An Industry Task Force met during the autumn of 2008 to advise on a structure and form of an Automotive R&D Partnership Initiative. Based on their recommendations, the Automotive Partnership has been established by five partnering agencies within the portfolio of Industry Canada. The objective of this 5-year, $145 million initiative is to support significant, incremental, collaborative R&D activities of benefit to the Canadian automotive industry; partnerships between industry and academia and/or the National Research Council.

The program involves funding from the following agencies:

The new initiative will provide opportunities for Chrysler Canada Inc. and University of Windsor’s Automotive Research and Development Centre in Windsor. (Cook)

3-13-2009

Auto Industry Reps Meet with Treasury to Discuss TALF
This week, the American Financial Services Association, the National Auto Dealers Association, American Honda Motor Co., and Chrysler LLC met with the US Department of the Treasury to discuss the newly formed TALF (Term Asset-Backed Securities Loan Facilities) program. Under the current parameters, many auto finance companies (including Chrysler Financial, who is currently rated BBB) are below the required AAA rating, and are therefore ineligible to participate. The Treasury department expressed concerns about the government taking on additional risk by expanding the program to include auto companies. Revising the TARP program to provide further aid for domestic auto finance companies was discussed as a possible alternative. The proposed revisions would come with a measure to restrict executive compensation. We will continue to monitor any changes to both the TALF and TARP programs. (Ellis Rochkind)

China Agrees to Drop Local Content Requirements
In one of the final steps in the long dispute settlement process in the WTO case brought by the U.S., EU and Canada against China concerning lack of national treatment for imported auto parts, China officially notified the three petitioning countries that it will eliminate the regulations that form the basis of the case by September 1, 2009. (Becker)

Canadian Government Acts to Approve the Economic Stimulus Bill
The Senate and the House of Commons yesterday approved legislation that will help provide immediate economic stimulus to Canadians. The Bill allows for the implementation of important elements of Budget 2009 affecting the auto industry, which includes improved access to financing for a $12 billion fund known as the Canadian Secured Credit Facility. It also includes authorization for short-term repayable loans to the automotive sector. (Cook)

Granholm Signs Unemployment Insurance Tax Relief Law
This week, Michigan Governor Granholm signed legislation that protects some 34,000 businesses from having to pay as much as $43 million this year in the form of a "solvency tax." The new law will save Chrysler $4-5M. The tax was imposed by the Unemployment Insurance Agency to cover interest payments on money the state has borrowed from the federal government to fund unemployment benefits. The bill allows Michigan to take advantage of a waiver in the federal stimulus and thereby protect businesses from having to pay a state solvency tax. (Estereicher)

3-6-2009

TALF Program Announced
The Term Asset-Backed Securities Loan Facilities (TALF) Program was announced this week. The program was designed to increase consumer lending up to $1 trillion by recreating the secondary consumer lending market. It would provide financing to investors to support their purchases of AAA-rated asset-backed securities (ABS). Chrysler Financial’s $7.5 ABS floor plan portfolio (currently rated BBB) is below the required AAA rating, therefore disqualifying them from receiving funding. Other automakers, including those not as deeply affected by the current auto crisis, also do not qualify under the restrictions.

Representatives Gary Peters (D-MI-9) and Thaddeus McCotter (R-MI-11) sent letters to the Federal Reserve and the Department of the Treasury requesting assistance for floorplan financing for the domestic automakers. Among the signers of the letter was House Financial Services Committee Chairman Barney Frank, which is a significant endorsement. A similar letter from Senators is in the works. (Ellis Rochkind)

EPA Holds Hearing on California Waiver
On Thursday, the US EPA held a public hearing to receive comments on its ongoing reconsideration of the previous Administration's decision to deny California the waiver. If the waiver is granted, California and thirteen other states would be able to enforce the greenhouse gas vehicle emissions standards adopted under AB 1493. Senator Levin testified against the waiver and in favor of a single national fuel economy standard, as did the Alliance of Automobile Manufacturers and others. Several California officials, officials from other states, and environmentalists were among those testifying in favor of the waiver. Chrysler is discussing this issue with the Obama Administration in the context of its viability plan. US EPA will receive written comments on the reconsideration of the waiver until April 6, 2009. (Hennessey)

Global Initiatives to Support the Auto Industry
Toyota, Honda and Mazda have turned to Japan’s government to borrow money for U.S. car loans. Plunging sales and a stronger yen forced Toyota to triple its operating loss estimate for this year within a two- month period. Honda Executive Vice President Koichi Kondo said that the firm will not earn an operating profit next fiscal year from April 1 if global auto demand remains weak and the dollar continues trading around 90 yen. Japan’s government will tap some of its $1 trillion in foreign-exchange reserves to help a state-run bank increase loans to companies operating abroad as credit becomes more scarce.

Meanwhile, Carlos Ghosn, in his role as President of ACEA, this week urged the EU to take a more proactive role in coordinating aid for Union’s carmakers in the face of differing national car bail-out plans. While acknowledging that one or more European carmakers could fail soon, Ghosn warned against the dangers of individual governments intervening on behalf of its carmakers. He also warned against the danger of tailoring rescue plans for single carmakers.

One national program that has been particularly successful is the German government’s incentive program to scrap old cars, which has led to a noticeable jump in sales in the domestic car market. New registrations rose 21% year on year in February, the highest level in a decade. In addition, German domestic car orders rose 63% in February. The incentive program was launched on January 15 and provides a $3,300 federal incentive for car owners to trade in cars that are at least nine year old if they buy a new or nearly new one. Some premier German car makers have complained that the major beneficiaries of the program have been producers of smaller, less expensive cars (many of them non German). (Molnar)

Bill to Reduce Sales Tax on New Vehicles
The Michigan Senate Finance Committee passed a bill to reduce customer sales taxes on new vehicles purchases. The bill would reduce sales tax to the difference between new vehicle purchase price and the trade in value. Chrysler is supporting the bill in cooperation with the Michigan Automobile Dealers Association, Ford and General Motors. The bill is expected to pass the full Senate and move to the House next week. (Estereicher)

2-27-2009

President Obama outlines energy and climate priorities in 2010 budget overview
Obama's plans to create a clean energy economy include:

• Reduce greenhouse gas emissions approximately 14 percent below 2005 levels by 2020, and approximately 83 percent below 2005 levels by 2050;
• Achieve these reductions through an economy-wide cap-and-trade system, beginning in 2012, with a 100% auction allowance, $15 billion/year of which will be spent on clean energy R&D for a ten-year period;
• 19M increase for EPA work on a Greenhouse Gas emission inventory;
• Target surface transportation spending and explores options to make the Nation’s communities more livable and less congested, such as through road pricing;
• Increase funding for public transit to support commuters, improve air quality, and reduce greenhouse gases; and
• Double the country's renewable energy capacity in three years.

The President will introduce specific budget proposals to achieve these priorities in April. (Hennessey)

Michigan's Top 4 Legislative Leadership in Washington
As part of the Speaker's Auto Coalition, this week House Speaker Andy Dillon, Senate Majority Leader Mike Bishop, House Minority Leader Kevin Elsenheimer and Senate Minority Leader Mike Prusi traveled to Washington to lobby President Barack Obama and Congress to support the domestic auto manufacturers and to extend financial assistance to automotive parts suppliers.  In the coming weeks, Speakers from 15 states will travel to Washington on behalf of the auto industry or send letters to Congress and the President. States include DE, IN, LA, GA, HI, IA, KY, MO, MN, NC, NY, OH, PA, WV and WI. (Estereicher)

2-20-2009

Congressional Reaction to Chrysler Viability Plan
Members of Congress had varied reactions to Chrysler’s viability plan submission this week.  Three general themes emerged from our briefings with key committee, leadership and plant state offices:

• Willingness to consider Fiat alliance in context of our viability plan
• Vast difference between Chrysler and GM SAAR assumptions (praise for our conservative approach)
• Renewed interest in Chrysler/GM combination based on our plan’s reference to GM

Senator Corker, who played an active role during the Congressional hearings in December, said that the proposed Chrysler-Fiat alliance is “something we should consider” if it provides the highest probability of the government getting its money back.  Another Republican and bailout critic, Sen. Richard Shelby of Alabama, said in a statement that the restructuring plans submitted by GM and Chrysler "fall short of providing credible strategies" for long-term viability.  "Instead of taking concrete steps to solve their business problems, GM and Chrysler hope to rely on additional taxpayer funding to avoid bankruptcy," said Shelby, the top Republican in the U.S. Senate Committee on Banking, Housing and Urban Affairs. (Molnar)

Chrysler Canada Submits Viability Plan to Canadian Federal and Ontario Governments
Chrysler Canada will today send its submission to the government in support of the company’s request for assistance.  This document supplements the original submission to the Federal and Ontario Governments of December 5, 2008. 

In related news, President Obama traveled to Canada on Thursday and in meetings with the Canadian Prime Minister, the two raised the possibility of using government stimulus funds to ease congestion at border crossings like Windsor-Detroit. Discussion also focused on climate change, the world economy and Afghanistan. (Cross) 

Michigan Speaker Passes Resolution
Michigan Speaker of the House Andy Dillon introduced, and the full House passed, a resolution in support of the domestic auto industry.  The resolution is part of Dillon's recently formed Speakers’ Auto Coalition.  The Coalition encourages Speakers from all 50 states to pass similar resolutions and to send letters of support to Congressional leaders and the U.S. Treasury.  Next week, Dillon will be in Washington to meet with White House officials and Congress, and he has invited legislative leaders from other states to join him. (Estereicher)