We’ve made a crusade of warning the public of the care that must be taken with their tire placement, and here’s another incident that bears us out.
Authorities in Port Saint Lucie, Fla., were blaming mismatched tires on an SUV with causing the vehicle to roll over, ejecting several children. Luckily, the victims didn’t sustain any critical injuries. See http://www.cbs12.com/news/lucie-4724233-port-turnpike.html
In the accident, a man was driving his 1997 Ford Explorer with five kids, all younger than 13, on the Turnpike.
His right rear passenger tire blew, he lost control of the SUV and it rolled over several times.
Three of the children were thrown out of the vehicle. They were hospitalized, but did not sustain any serious injury.
Authorities said that the tire that failed was a different brand than those on the SUV’s other three wheels. And the front left tire was badly worn and needed to be changed.
The main cause of accidents on the Turnpike are worn-out and under-inflated tires, according to the Florida Highway Patrol. To that list we would add having uneven tread between front and back tires, with the better tires on the front. See http://car-accident-rain.com for more information.
Alaska Mulls Making Snow Tires Mandatory
Better tires? Sounds like a great idea, right. Well not if they put the new tires on only the front. See http://car-accident-rain.com All tire manufacturers agree that it is extremely dangerous to have newer tires on the front of a vehicle than on the back.
Alaska lawmakers are weighing whether to require state residents to install winter tires on their vehicles from mid-December to mid-March.
http://newsminer.com/view/full_story/6376818/article-Alaska-Legislature-considers-making-snow-tires-mandatory?instance=home_news_window_left_top_2
The bill also permits the use of studded tires, as well as name-brand tires that the Alaska Department of Public Safety deems acceptable.
The Alaska Legislature’s transportation committee had a hearing on the tire bill Tuesday, when a proposal to bar the use of cell phones by drivers was also discussed.
At the hearing tire company officials said that most winter accidents and deaths in the far northern United States and Europe are caused by problems with turning. We wonder why they didn’t raise the issue they all agree about with respect to assuring that if only two tires are replaced, they must go on the back. This rule would apply even more so for snow tires. Remember, the natural inclination would be to put the snow tires on the front of a front wheel drive car.
Alaska lawmakers are weighing whether to require state residents to install winter tires on their vehicles from mid-December to mid-March.
http://newsminer.com/view/full_story/6376818/article-Alaska-Legislature-considers-making-snow-tires-mandatory?instance=home_news_window_left_top_2
The bill also permits the use of studded tires, as well as name-brand tires that the Alaska Department of Public Safety deems acceptable.
The Alaska Legislature’s transportation committee had a hearing on the tire bill Tuesday, when a proposal to bar the use of cell phones by drivers was also discussed.
At the hearing tire company officials said that most winter accidents and deaths in the far northern United States and Europe are caused by problems with turning. We wonder why they didn’t raise the issue they all agree about with respect to assuring that if only two tires are replaced, they must go on the back. This rule would apply even more so for snow tires. Remember, the natural inclination would be to put the snow tires on the front of a front wheel drive car.
Toronto Maple Leaf GM’s Son Killed in Indiana Crash
The son of Brian Burke, general manager of the NHL Toronto Maple Leafs, and another youth were both killed in a head-on crash with a truck in central Indiana Friday. http://www.vancouversun.com/sports/Leafs+Burke+killed+accident/2529702/story.html
Brendan Burke, 21, of Canton, Mass., and Mark Reedy died when the car Burke was driving skidded on ice and hit a truck on Highway 35 near Economy, Ind. The accident took place about 70 miles northeast of Indianapolis. Reedy was an 18-year-old Michigan State University freshman studying engineering.
A heavy snowfall made roads slippery and Burke’s 2004 Jeep Grand Cherokee hit a 1997 Ford truck head-on.
Burke attended Miami University in Ohio and had a job with the school’s hockey team.
His death brings into question whether his father will go through with plans to attend the opening ceremony of the Winter Olympics in Vancouver Feb. 12.
In a press release, the Maple Leafs said, “We are saddened to report that Brendan Burke, the youngest son of Toronto president and general manager Brian Burke, succumbed to injuries he suffered in an auto accident earlier today in Indiana. The family asks for privacy at this very difficult time.”
As we have said repeatedly on this blog, fully understanding what happened in this accident requires an inspection and investigation of the relative tread on the tires on Burke’s vehicle. If the tires on the front were newer than those on the back, this might be what caused the skid. For more information on potential liability of non-drivers in skidding accidents, see http://car-accident-rain.com
Brendan Burke, 21, of Canton, Mass., and Mark Reedy died when the car Burke was driving skidded on ice and hit a truck on Highway 35 near Economy, Ind. The accident took place about 70 miles northeast of Indianapolis. Reedy was an 18-year-old Michigan State University freshman studying engineering.
A heavy snowfall made roads slippery and Burke’s 2004 Jeep Grand Cherokee hit a 1997 Ford truck head-on.
Burke attended Miami University in Ohio and had a job with the school’s hockey team.
His death brings into question whether his father will go through with plans to attend the opening ceremony of the Winter Olympics in Vancouver Feb. 12.
In a press release, the Maple Leafs said, “We are saddened to report that Brendan Burke, the youngest son of Toronto president and general manager Brian Burke, succumbed to injuries he suffered in an auto accident earlier today in Indiana. The family asks for privacy at this very difficult time.”
As we have said repeatedly on this blog, fully understanding what happened in this accident requires an inspection and investigation of the relative tread on the tires on Burke’s vehicle. If the tires on the front were newer than those on the back, this might be what caused the skid. For more information on potential liability of non-drivers in skidding accidents, see http://car-accident-rain.com
Canadian Tire Retailer Institutes ‘Four or Nothing’ Policy On Snow Tire Sales
After facing a rash of lawsuits, the company Canadian Tire is refusing to sell customers just two snow tires, the Halifax Chronicle-Herald reported. http://www.tirereview.com/Article/70473/canadian_tire_has_strict_four_or_nothing_winter_tire_policy.aspx
The tire retailer’s outlets in Halifax, Canada, has adopted a “four or nothing” policy in terms of supplying snow tires.
Canadian Tire has tried to educate consumers on the importance of having four snow tires on your vehicle, not just two, the story said. One service manager was quoted as saying that Canadian Tire had a number of lawsuits pending against it from drivers who had accidents after buying and driving around with only two winter tires.
In the litigation, the tire retailer was blamed for permitting customers to buy only two snow tires, not four.
“It’s an established fact that four snow tires are required for maximum safety for winter driving,” the service manager, Frank Glazer, told the Chronicle-Herald.
The issue is not just new tires all around, but also that under no circumstances are the tires on front, to have more traction than those on the back. If it were a front wheel drive car and you put the snow tires on the front, this would be a recipe for disaster. See our webpage that explains this in detail: http://car-accident-rain.com
The tire retailer’s outlets in Halifax, Canada, has adopted a “four or nothing” policy in terms of supplying snow tires.
Canadian Tire has tried to educate consumers on the importance of having four snow tires on your vehicle, not just two, the story said. One service manager was quoted as saying that Canadian Tire had a number of lawsuits pending against it from drivers who had accidents after buying and driving around with only two winter tires.
In the litigation, the tire retailer was blamed for permitting customers to buy only two snow tires, not four.
“It’s an established fact that four snow tires are required for maximum safety for winter driving,” the service manager, Frank Glazer, told the Chronicle-Herald.
The issue is not just new tires all around, but also that under no circumstances are the tires on front, to have more traction than those on the back. If it were a front wheel drive car and you put the snow tires on the front, this would be a recipe for disaster. See our webpage that explains this in detail: http://car-accident-rain.com
Wisconsin Man Killed in Freak Tire Accident
A Northwest Wisconsin man met an untimely end in a freak accident where he was hit by a flying tire.
Shane Erickson of Somerset, Wis., was driving right over the state’s border in Minnesota when his vehicle was hit by a flying tire from a pickup truck, according to an online story by the radio station WTAQ, http://new.wtaq.com/news/articles/2010/jan/25/somerset-man-killed-mn-freak-accident/
The fatal accident took place last Saturday on Highway 95 in Oak Park, Minn.
Erickson was killed even though he was wearing a seat belt and despite the fact that his air bag opened when his vehicle was hit.
Another Wisconsin resident, a man from New Richmond, was the driver of the pickup truck.
Shane Erickson of Somerset, Wis., was driving right over the state’s border in Minnesota when his vehicle was hit by a flying tire from a pickup truck, according to an online story by the radio station WTAQ, http://new.wtaq.com/news/articles/2010/jan/25/somerset-man-killed-mn-freak-accident/
The fatal accident took place last Saturday on Highway 95 in Oak Park, Minn.
Erickson was killed even though he was wearing a seat belt and despite the fact that his air bag opened when his vehicle was hit.
Another Wisconsin resident, a man from New Richmond, was the driver of the pickup truck.
Winter Tire Challenges – Front Wheel Drive Cars Should have Snow Tires on Back
Front wheel drive cars. I remember when they were a novelty. I had a 1966 Toronado, reputedly the first major front wheel drive. And the common wisdom then was to put the snow tires on the front. My guess is that is still the common wisdom. Actually, it is the common misconception.
All tire manufacturers agree that the tires with the best traction must be on the back. If not when your car begins to fishtail or hydroplane, you won’t be able to steer out of the skid and you will be in a spin.
We have a new web home, http://car-accident-rain.com Odd time of year to focus on rain accidents, but the dynamics are the same. Snow and rain make your car hydroplane. If you begin to skid, you will be able to control it if you have the better traction on the back. If you have the better traction the front, you are in serious trouble.
Any tire installer that put the new tires or the snow tires on the front, has committed a negligent act that could kill or seriously injure. Insist on the better tires in back.
If someone you know got hurt in a skidding accident, call us to see if it was the tire installers fault.
All tire manufacturers agree that the tires with the best traction must be on the back. If not when your car begins to fishtail or hydroplane, you won’t be able to steer out of the skid and you will be in a spin.
We have a new web home, http://car-accident-rain.com Odd time of year to focus on rain accidents, but the dynamics are the same. Snow and rain make your car hydroplane. If you begin to skid, you will be able to control it if you have the better traction on the back. If you have the better traction the front, you are in serious trouble.
Any tire installer that put the new tires or the snow tires on the front, has committed a negligent act that could kill or seriously injure. Insist on the better tires in back.
If someone you know got hurt in a skidding accident, call us to see if it was the tire installers fault.
Hydroplaning Wreck In Illinois
With the coming of the rainy weather comes a big uptick in hydroplaning wrecks. The news today fortunately didn’t involve serious injury but it should be a gentle reminder of how dangerous the combination of mismatching your tires can be.
In Abingdon, Illinois a car slid on wet pavement and ended in a ditch. According to the Galesburg Register-Mail Newspaper the car had three occupants and luckily no one suffered major injuries. For more information, click here: http://www.galesburg.com/news/x1699610454/Wet-pavement-lands-car-in-ditch
The Galesburg Register cited “speeding” as being a potential factor that caused the car to hydroplane.
It is important to know that hydroplaning wrecks become more devastating and the risk of such accidents grow exponentially as speed increases. Far too many of these wrecks are ignored because the most injured party is thought to be at fault.
However, failing to properly investigate the tire installation fact in a hydroplaning wreck is a huge mistake. All manufacturers recommendations state that the new tires should go on the back. If new tires are installed on the front (the myth as to what should be done) the sellers or installers of such tires are clearly liable for all injuries.
In Abingdon, Illinois a car slid on wet pavement and ended in a ditch. According to the Galesburg Register-Mail Newspaper the car had three occupants and luckily no one suffered major injuries. For more information, click here: http://www.galesburg.com/news/x1699610454/Wet-pavement-lands-car-in-ditch
The Galesburg Register cited “speeding” as being a potential factor that caused the car to hydroplane.
It is important to know that hydroplaning wrecks become more devastating and the risk of such accidents grow exponentially as speed increases. Far too many of these wrecks are ignored because the most injured party is thought to be at fault.
However, failing to properly investigate the tire installation fact in a hydroplaning wreck is a huge mistake. All manufacturers recommendations state that the new tires should go on the back. If new tires are installed on the front (the myth as to what should be done) the sellers or installers of such tires are clearly liable for all injuries.
Now We Trust our Tires to the Chinese?
Chinese Products and American Public Safety? Where have I heard those two concepts together before? Was it heparin? The deaths of potentially thousands of American because Baxter imported contaminated heparin to the U.S. http://heparin-law.com Then there was the lead in toys, the baby formula scandal, even Chinese drywall. Now we learn that our tires are coming from the Chinese. We learn this because President Obama has decided to slap an import duty on those tires because of unfair trade practices. See the Washington Post Article at http://www.washingtonpost.com/wp-dyn/content/article/2009/09/11/AR2009091103973.html
According to the Post, Obama imposed this import duty because of American union complaints:
Here is what we learned about Chinese manufacturing practices, with something as potentially toxic as an IV medicine, from what our own government has labeled the “Heparin Catastrophe.”
First, an American corporation, Baxter, decided to import from China a drug put directly into the veins of our sickest people to make a few extra pennies on the sale of each dose. Second, Baxter knew at the time they made this decision that it could take as much as 30 years for the FDA to get around to inspecting the Chinese plant. Three, they knew at such time that the single biggest problem with importing drugs was contaminants and counterfeiting. Four, they knew or should have known that no one in the plant in China that was producing Heparin had any specialized knowledge of how to make Heparin. Five, they knew that the purity test that they were using for Heparin was not sensitive enough to catch contaminants.
I don’t know all of the details but I would guess that the story is the same for lead in toys, drywall and baby formula. Greed takes precedence over quality control. Buy the cheap stuff from China, make more corporate profits. Well there is a reason it is cheaper – it isn’t the same product. When you sacrifice quality control you not only get crap, you are compromising safety.
If you apply the lessons of Heparin to tires, it could be just as scary. 46 million tire failures could add up to thousands of lives. Tires are one of the single biggest causes of motor vehicle accidents, especially the kind where the accidents don’t involve clear negligence by either driver. See http://fishtail.tv. The problem with manufacturing in China, you don’t know that the Chinese are competent to manufacture to our specifications for safety. You don’t know if someone in the Chinese supply chain is intentionally counterfeiting one of the esssential raw materials or chemicals needed to make the tire safe. You don’t have any meaningful way to ensure safety.
Chinese tires not only could cost American jobs, they could cost American lives.
According to the Post, Obama imposed this import duty because of American union complaints:
The United Steelworkers union, which represents workers at many U.S. tire production plants, filed a petition earlier this year asking for the protection.The jobs are undoubtedly important and it is clearly time for the U.S. to start protecting American jobs. But when I read this story, I can’t help but shudder about Chinese tires. As I said in my last blog: “Everything is riding on those tires.” How can we trust the Chinese to build a tire that you would want to entrust your families safety to? Is that just nationalistic crap, chest beating? I think not.
It said a tripling of tire imports from China to about 46 million in 2008 from about 15 million in 2004 had cost more than 5,000 U.S. tire worker jobs.
An additional 35 percent duty will be placed for a year on Chinese-made passenger vehicle and light truck tires, the White House said in a statement.
Here is what we learned about Chinese manufacturing practices, with something as potentially toxic as an IV medicine, from what our own government has labeled the “Heparin Catastrophe.”
First, an American corporation, Baxter, decided to import from China a drug put directly into the veins of our sickest people to make a few extra pennies on the sale of each dose. Second, Baxter knew at the time they made this decision that it could take as much as 30 years for the FDA to get around to inspecting the Chinese plant. Three, they knew at such time that the single biggest problem with importing drugs was contaminants and counterfeiting. Four, they knew or should have known that no one in the plant in China that was producing Heparin had any specialized knowledge of how to make Heparin. Five, they knew that the purity test that they were using for Heparin was not sensitive enough to catch contaminants.
I don’t know all of the details but I would guess that the story is the same for lead in toys, drywall and baby formula. Greed takes precedence over quality control. Buy the cheap stuff from China, make more corporate profits. Well there is a reason it is cheaper – it isn’t the same product. When you sacrifice quality control you not only get crap, you are compromising safety.
If you apply the lessons of Heparin to tires, it could be just as scary. 46 million tire failures could add up to thousands of lives. Tires are one of the single biggest causes of motor vehicle accidents, especially the kind where the accidents don’t involve clear negligence by either driver. See http://fishtail.tv. The problem with manufacturing in China, you don’t know that the Chinese are competent to manufacture to our specifications for safety. You don’t know if someone in the Chinese supply chain is intentionally counterfeiting one of the esssential raw materials or chemicals needed to make the tire safe. You don’t have any meaningful way to ensure safety.
Chinese tires not only could cost American jobs, they could cost American lives.
Michelin Tires Blamed in $12 million lawsuit
Every trial lawyer has known the frustration of the potential client with catastrophic injuries in a one car accident or an accident where there was no adequate insurance. The driver of the car is either the actual victim or is insufficiently insured to compensate the injured person or persons. But before the lawyer closes that file, he must ask where does the actual fault lie? In thousands of cases, its the tires. In only a few does someone think to look, or look at all of the right issues.
For the victims of Michelin’s negligence in Brownsville, Texas, the lawyer got it right. According to the Brownsville Herald, a jury has ordered Michelin to pay nearly $12 million after finding that faulty tires caused a wreck that killed six people. http://www.brownsvilleherald.com/news/raymondville-102219-jury-tire.html According to this story:
For the victims of Michelin’s negligence in Brownsville, Texas, the lawyer got it right. According to the Brownsville Herald, a jury has ordered Michelin to pay nearly $12 million after finding that faulty tires caused a wreck that killed six people. http://www.brownsvilleherald.com/news/raymondville-102219-jury-tire.html According to this story:
A Willacy County jury returned an $11.96 million judgment against the nation’s largest tire maker Thursday, after finding defective tires caused a wreck that killed six people and left a 12-year-old boy paralyzed.Always look at the tires in every severe motor vehicle wreck case. We have written on this many times before including our entire webpage about hydroplaning accidents at http://fishtail.tv The true fault may lie with the tires – “there is a lot riding on those tires”.
The panel found that a manufacturing flaw in a Goodrich tire — made by South Carolina-based Michelin North America — substantially contributed to the New Year’s Eve 2006 crash that occurred just outside Matamoros.
The tire on a 2002 Ford F-250 pickup truck driven by the family of then 10-year-old Jesus Guzman separated from its tread, causing the vehicle to swerve into oncoming traffic, according to court documents. The truck collided with a Chevrolet Suburban killing all six passengers inside the SUV.
Obama auto task force shifts to automaker owner
I applaud the government intervention to save the U.S. auto industry. Compared to the money that was spent on saving Wallstreet, this effort to preserve the heart of the American industrial power and American Union jobs, is the good fight. Yet, one thing that cannot get lost in this shuffle to remake the auto industry is the progress that has been made on auto safety. Cars are safer than they were a generation ago. But just because the government is the principal shareholder in GM, meaning “we” are the principal shareholder in GM, doesn’t mean that the commitment to making cars safer should be a lower priority.
If you make a product, you must make it safe. If you don’t the tort law should hold you accountable for that failure. If the failure is outrageous, then you should also be punished.
I do not believe that the Federal Government being shareholders in a company means it can’t be run as efficiently. But the only way to make any company truly profitable is to makes its products better, which means safer, too.
Attorney Gordon Johnson
http://tbilaw.com
http://fishtail.tv
Date: 7/15/2009 4:01 PM
KEN THOMAS,Associated Press Writers
STEPHEN MANNING,Associated Press Writers
WASHINGTON (AP) — When it brokered the restructuring of Chrysler and General Motors, President Barack Obama’s auto task force repeatedly pledged that it would steer clear of running a car company.
But with both companies exiting bankruptcy with the federal government as a major shareholder, that promise will be put to the test as the task force shifts roles from negotiator to owner.
The government could face a number of pitfalls: It could be tempted to insert itself into the day-to-day operations or sway management if auto sales continue to slide and carmakers’ financial woes continue. Lawmakers may try to use the government’s ownership as a way to push their own interests, such as making more fuel efficient cars. And the administration will need to sell its stake as quickly as possible.
“I take them at their word that they don’t want to run an auto company, the question is whether they will get dragged into it,” said Martin Zimmerman, a University of Michigan business professor who studies the auto industry. “There is a significant chance that will happen.”
Appointed by Obama in February, the task force includes representatives of cabinet members and economic advisers. It is officially headed by Treasury Secretary Timothy Geithner and Lawrence Summers, the director of the National Economic Council. But much of the work was overseen by two senior advisers, Steven Rattner and Ron Bloom. Rattner stepped down last week, leaving Bloom as the leader.
Wielding power in public companies once thought unimaginable, the government panel’s efforts laid the groundwork for quick bankruptcies that helped Chrysler and GM emerge with smaller debt loads, reduced work forces and streamlined brands and dealer networks.
In the process, roughly $65 billion in government loans and aid was sunk into the two companies. Under the restructuring plans, the government now owns about 8 percent of Chrysler and 61 percent of GM.
Rattner stressed again last week that the task force plans to take a hands-off approach, saying that it wasn’t interested in “picking colors of cars.” But he noted that with such a large financial interest, the government would take a role similar to a large institutional investor.
“We have fiduciary responsibilities to the taxpayers to ensure that investment is well looked after. We will interact with GM, its management and board,” Rattner said.
Both companies face a brutal car market and numerous competitors seeking buyers in a depleted market. Auto companies are on pace to sell about 9.7 million vehicles in the U.S. this year compared with sales of more than 16 million vehicles in 2007. If the bleak conditions persist, it could increase pressure on the government to play a more active role.
Some supporters of the auto industry expect the task force to maintain its arms-length distance, crediting it with giving the two companies new life without inserting itself too much into the way Chrysler and GM conduct their business.
“They have the job to improve the foundations for restructuring without making decisions that require expertise about how you make a car,” said Rep. Sander Levin, D-Mich. “That’s the difference. How you manage is different than how you make a car.”
But critics worry that the task force has wielded too much influence and may do so again.
The plight of hundreds of shuttered auto dealers offers a window into the pressures the administration could face. GM and Chrysler are closing nearly 3,000 dealerships, moves supported by the administration. Key lawmakers including House Majority Leader Steny Hoyer, D-Md., oppose the action, saying it evades state franchise laws and will lead to the loss of tens of thousands of jobs.
“This whole notion is that some brainiac down at the task force came up with the idea that Toyota sells a lot of cars and they have less dealers and therefore we should make GM and Chrysler look like Toyota. It’s stupid,” said Rep. Steven LaTourette, R-Ohio.
The White House said Wednesday it opposed the attempts to restore the GM and Chrysler franchise agreements.
Gerald Meyers, former chairman of American Motors Corp., said the temptation to meddle with the type of cars the companies make, where factories are located, and who runs the automakers, may be too great for the Obama administration and Congress to resist.
“It isn’t in the DNA of the government to stay out,” he said.
For example, House Republicans have questioned GM CEO Fritz Henderson about the company’s decision to maintain a parts distribution center in the district of Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee. Frank had urged Henderson to keep the facility open. And the administration’s firing of GM CEO Rick Wagoner also looms large.
Administration officials said they want to dispose of the government’s ownership interests as soon as practicable. While the U.S. stake is much smaller in Chrysler — the company is now aligned with Italian automaker Fiat — there will be intense scrutiny on the government’s share of GM.
GM is expected to conduct in initial public offering in 2010 and its shares would need to grow in value for the government to break-even or make money.
“We are not trying to be Warren Buffett here. We are not trying to squeeze every last dollar out,” Rattner said before his departure. “We do want to do well for the taxpayers but the most important thing is to get the government out of the car business.”
The Congressional Budget Office has provided a pessimistic outlook for a full refund, estimating last month that only about $15 billion of the initial $55 billion to GM, Chrysler, its financing arms and suppliers would be repaid. The analysis did not include the $30 billion GM received to help it navigate bankruptcy.
Also unclear is how long the task force will continue to exist. Some lawmakers, such as Rep. Gary Peters, D-Mich., want it to tackle lingering problems of other segments of the auto sector, such as extending loans to auto parts suppliers that are struggling as GM and Chrysler cut back.
Rattner said that the task force will “inevitably get smaller” as it shifts to monitoring the federal government’s investment in Chrysler and GM.
Bloom was an adviser for the United Steelworkers union before coming to Washington, helping guide it through a similar restructuring of the steel industry. His former boss, union vice president Tom Conway, said he has a firm grasp of manufacturing issues. But he wondered how long Bloom would stay with the task force, especially n ow that most of the difficult negotiating is over.
“You get this thing done and signed off on, you get a new management team in there and you move on,” he said of restructuring deals.
Copyright 2009 The Associated Press.
If you make a product, you must make it safe. If you don’t the tort law should hold you accountable for that failure. If the failure is outrageous, then you should also be punished.
I do not believe that the Federal Government being shareholders in a company means it can’t be run as efficiently. But the only way to make any company truly profitable is to makes its products better, which means safer, too.
Attorney Gordon Johnson
http://tbilaw.com
http://fishtail.tv
Date: 7/15/2009 4:01 PM
KEN THOMAS,Associated Press Writers
STEPHEN MANNING,Associated Press Writers
WASHINGTON (AP) — When it brokered the restructuring of Chrysler and General Motors, President Barack Obama’s auto task force repeatedly pledged that it would steer clear of running a car company.
But with both companies exiting bankruptcy with the federal government as a major shareholder, that promise will be put to the test as the task force shifts roles from negotiator to owner.
The government could face a number of pitfalls: It could be tempted to insert itself into the day-to-day operations or sway management if auto sales continue to slide and carmakers’ financial woes continue. Lawmakers may try to use the government’s ownership as a way to push their own interests, such as making more fuel efficient cars. And the administration will need to sell its stake as quickly as possible.
“I take them at their word that they don’t want to run an auto company, the question is whether they will get dragged into it,” said Martin Zimmerman, a University of Michigan business professor who studies the auto industry. “There is a significant chance that will happen.”
Appointed by Obama in February, the task force includes representatives of cabinet members and economic advisers. It is officially headed by Treasury Secretary Timothy Geithner and Lawrence Summers, the director of the National Economic Council. But much of the work was overseen by two senior advisers, Steven Rattner and Ron Bloom. Rattner stepped down last week, leaving Bloom as the leader.
Wielding power in public companies once thought unimaginable, the government panel’s efforts laid the groundwork for quick bankruptcies that helped Chrysler and GM emerge with smaller debt loads, reduced work forces and streamlined brands and dealer networks.
In the process, roughly $65 billion in government loans and aid was sunk into the two companies. Under the restructuring plans, the government now owns about 8 percent of Chrysler and 61 percent of GM.
Rattner stressed again last week that the task force plans to take a hands-off approach, saying that it wasn’t interested in “picking colors of cars.” But he noted that with such a large financial interest, the government would take a role similar to a large institutional investor.
“We have fiduciary responsibilities to the taxpayers to ensure that investment is well looked after. We will interact with GM, its management and board,” Rattner said.
Both companies face a brutal car market and numerous competitors seeking buyers in a depleted market. Auto companies are on pace to sell about 9.7 million vehicles in the U.S. this year compared with sales of more than 16 million vehicles in 2007. If the bleak conditions persist, it could increase pressure on the government to play a more active role.
Some supporters of the auto industry expect the task force to maintain its arms-length distance, crediting it with giving the two companies new life without inserting itself too much into the way Chrysler and GM conduct their business.
“They have the job to improve the foundations for restructuring without making decisions that require expertise about how you make a car,” said Rep. Sander Levin, D-Mich. “That’s the difference. How you manage is different than how you make a car.”
But critics worry that the task force has wielded too much influence and may do so again.
The plight of hundreds of shuttered auto dealers offers a window into the pressures the administration could face. GM and Chrysler are closing nearly 3,000 dealerships, moves supported by the administration. Key lawmakers including House Majority Leader Steny Hoyer, D-Md., oppose the action, saying it evades state franchise laws and will lead to the loss of tens of thousands of jobs.
“This whole notion is that some brainiac down at the task force came up with the idea that Toyota sells a lot of cars and they have less dealers and therefore we should make GM and Chrysler look like Toyota. It’s stupid,” said Rep. Steven LaTourette, R-Ohio.
The White House said Wednesday it opposed the attempts to restore the GM and Chrysler franchise agreements.
Gerald Meyers, former chairman of American Motors Corp., said the temptation to meddle with the type of cars the companies make, where factories are located, and who runs the automakers, may be too great for the Obama administration and Congress to resist.
“It isn’t in the DNA of the government to stay out,” he said.
For example, House Republicans have questioned GM CEO Fritz Henderson about the company’s decision to maintain a parts distribution center in the district of Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee. Frank had urged Henderson to keep the facility open. And the administration’s firing of GM CEO Rick Wagoner also looms large.
Administration officials said they want to dispose of the government’s ownership interests as soon as practicable. While the U.S. stake is much smaller in Chrysler — the company is now aligned with Italian automaker Fiat — there will be intense scrutiny on the government’s share of GM.
GM is expected to conduct in initial public offering in 2010 and its shares would need to grow in value for the government to break-even or make money.
“We are not trying to be Warren Buffett here. We are not trying to squeeze every last dollar out,” Rattner said before his departure. “We do want to do well for the taxpayers but the most important thing is to get the government out of the car business.”
The Congressional Budget Office has provided a pessimistic outlook for a full refund, estimating last month that only about $15 billion of the initial $55 billion to GM, Chrysler, its financing arms and suppliers would be repaid. The analysis did not include the $30 billion GM received to help it navigate bankruptcy.
Also unclear is how long the task force will continue to exist. Some lawmakers, such as Rep. Gary Peters, D-Mich., want it to tackle lingering problems of other segments of the auto sector, such as extending loans to auto parts suppliers that are struggling as GM and Chrysler cut back.
Rattner said that the task force will “inevitably get smaller” as it shifts to monitoring the federal government’s investment in Chrysler and GM.
Bloom was an adviser for the United Steelworkers union before coming to Washington, helping guide it through a similar restructuring of the steel industry. His former boss, union vice president Tom Conway, said he has a firm grasp of manufacturing issues. But he wondered how long Bloom would stay with the task force, especially n ow that most of the difficult negotiating is over.
“You get this thing done and signed off on, you get a new management team in there and you move on,” he said of restructuring deals.
Copyright 2009 The Associated Press.