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Outraged
     

Outraged

by Tamara Darvish, Lillie Guyer
 

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In Outraged, an auto insider provides an inspiring account of what it means to lose your rights, property, and, in essence, the American dream. It begins with roughly two thousand men and women whose companies were destroyed by two automakers, General Motors and Chrysler, during their government-led corporate restructurings in 2009.

Authors Tamara Darvish, vice

Overview

In Outraged, an auto insider provides an inspiring account of what it means to lose your rights, property, and, in essence, the American dream. It begins with roughly two thousand men and women whose companies were destroyed by two automakers, General Motors and Chrysler, during their government-led corporate restructurings in 2009.

Authors Tamara Darvish, vice president of DARCARS Automotive in Maryland, and Lillie Guyer, a Detroit area automotive journalist, show the collapse of the American dream from the perspective of an entrepreneur who was affected by the automotive industry bailout. In this featurized business story, Outraged details the founding of the activist group Committee to Restore Dealer Rights and its efforts to regain the economic rights of auto dealerships throughout the United States. It tells how they took their fight to Congress and to the steps of the White House.

Outraged candidly examines the battles between dealers and the entities that engineered their demise. It also details the pain and the high points in government as its temporary power brokers ignore the significant role of Congress in lawmaking and the rights of ordinary citizens. This personal, controversial account shows what can happen when people unite in a common cause and stand up for what they believe is right.

Product Details

ISBN-13:
9781450289443
Publisher:
iUniverse, Incorporated
Publication date:
10/03/2011
Pages:
432
Sales rank:
1,143,971
Product dimensions:
5.90(w) x 8.90(h) x 1.00(d)

Read an Excerpt

OUTRAGED

How Detroit and the Wall Street Car Czars Killed the American Dream
By Tamara Darvish Lillie Guyer

iUniverse, Inc.

Copyright © 2011 Tamara Darvish and Lillie Guyer
All right reserved.

ISBN: 978-1-4502-8944-3


Chapter One

Unraveling the War on Dealers

If you abide by the law you should be protected by it; if you adhere to our common values you should be treated no different than anyone else. —President Barack Obama's 2010 State of the Union Speech

A lasting image in America's collective mind is that day, November 18, 2008, when three chief executives of the Detroit Three flew into Washington DC aboard their corporate jets. The stories instantly made national broadcast news and major headlines.

General Motors CEO Richard Wagoner debarked from the company's Gulfstream IV jet, and ABC TV showed the descent in living color. Ford Motor Company CEO Alan Mulally, and Robert Nardelli, CEO at Chrysler LLC, also flew in on company jets, the media reported.

Broadcast stations were all over it after ABC News broke the news. The next day, in a story headlined "Shocker: Fat cat CEOs fly on private jets!" Reuters reported the story that was soon "heard around the world." Rick Wagoner told media he took a company jet because he's a busy guy. Ford's Mulally, who didn't say much, seemed to be following Henry Ford's motto of "don't complain, don't explain." Robert Nardelli tried to stay out of the limelight at the time as well.

While America watched, the CEOs had arrived to ask for a twenty-five-billion dollar lifeline, a taxpayer bailout, to keep their companies running. Their timing was atrocious. The "B-word" was becoming a dirty word in consumers' minds. Of the more than $700 billion in Troubled Asset Relief Program (TARP) funds available to rescue failing companies, the majority had been doled out to the financial institutions and Wall Street entities.

The automakers kept saying their request was a conditional loan, not a bailout. But that distinction was lost on many Americans. And they would ask for more in the coming months.

The executives took heat for the private jets and later changed to other transportation modes, as if just discovering them. Top-dog Wagoner tooled around DC in the new production model Chevrolet Volt, a combined electric and gas extended-range car that debuted in November 2010. The other leaders originally flew in on private jets but seemed to get less flack.

Big PR splashes were later orchestrated to show the execs arriving on commercial jets or driving more fuel-efficient company vehicles as they pressed for public funds. But the damage had been done. The earlier images of corporate excess were difficult to erase.

What "Joe and Josephine America" remembered was that executives earning millions of dollars a year and fat perks were asking for taxpayer-funded assistance, a new form of "corporate welfare." In a time when many Americans had to tighten belts and live more frugally, the execs were traveling on luxury jets on trips that cost upward of $20,000 to fly from Detroit to Chicago alone, a shorter distance than to DC, ABC News reported. In the public eye, it was like watching a welfare recipient buy tons of caviar and vodka with food stamps.

"This is a difficult time for a free-market person. Under ordinary circumstances, failed entities, failing entities, should be allowed to fail. I have concluded that these are not ordinary circumstances," President George W. Bush said on December 18, about a month before he departed office. Bush did not want to leave office knowing that the American car industry had gone down under his watch. The funding spigot was turned on then.

In exiting, the Bush administration punted the auto-rescue problem to the incoming Democrats. It was all tied to the huge money pot called TARP (Troubled Asset Relief Program) that was used to prop up banking, financial, and now the auto industries. But it came with strings attached. Money always does.

Fast forward to the Barack Obama White House in January. With the new president installed, the auto executives were asking for more money. Since their earlier November meetings with Bush officials, the auto leaders had one mission in mind: secure a massive infusion of cash to save their fragile, bleeding companies.

Earlier, the Bush Treasury, headed by Hank Paulson, had approved loans of $17.6 billion for GM and Chrysler. As it turned out, Ford backed out and said it would not ask for federal loans, saying it would go it alone by relying on private credit lines of financing and selling off assets. By the time GM and Chrysler asked for emergency loans, Ford had already tapped into its remaining credit lines—luckily well before credit markets froze nationwide.

In 2008, Ford had its worst year in its recorded history but was able to bring its cash reserves up to $24 billion by January, CEO Alan Mulally later said. They would tough out the lousy economy without the emergency federal loans, Ford leaders said Ford had borrowed about $24 billion in late 2006 right after Mulally arrived, coming from Boeing Company. The automaker also put up its major assets and began austere cost-cutting measures.

In the Bush White House, Paulson was a big proponent of saving the auto industry, as would Larry Summers, who served then as President Obama's chief economic advisor. He was joined by Timothy Geithner, the US Treasury Secretary who drove the bus that would lead to restructuring the auto dynasty known as General Motors and Chrysler LLC, the nation's third-largest automaker, then owned primarily by Cerberus Capital Management.

Ironically, Summers, a former Harvard University dean and true believer in capitalism and free markets, expressed his distaste for government interference in business. Yet that was exactly what his fledgling auto group that was charged with rescuing the automotive industry went on to do.

On February 15, not quite a month into office, Obama announced a new interagency group called the "auto task force." It was this temporary group that would take on the complex assignment of restructuring the automakers and making the calls on key stakeholders such as the United Auto Workers, creditors groups, suppliers, and dealers.

Why was it important to save these automakers in this industry? At stake was the nation's industrial manufacturing might and history. Manufacturing has always been a major engine for the economy; it's also an industry important to national defense. Some estimates were that one in nine jobs rely on the auto industry, directly or indirectly affecting everyone from dealerships to department stores, barbershops, restaurants, and other businesses.

Also at stake was GM, the US kingpin and the largest auto manufacturer in the world until 2008, when Toyota Motor Manufacturing replaced it; and Chrysler, the underdog company which had struggled over the decades to compete and remain solvent, was important to the economy and keeping people working. Shut down Chrysler alone and watch three hundred thousand jobs disappear, the auto task force said.

And economists feared the declining economy could not withstand a Detroit implosion. President Obama claimed he inherited a $1.3 trillion budget deficit from the Republicans and should not be judged so harshly on his efforts to save the automotive industry. The new president had his share of critics in funding yet more failing companies. After beginning his term on January 21, he spoke about shared sacrifice. That's what ordinary citizens and companies need to do in extraordinary times, he said. Take the bitter medicine and pull together for the greater good.

White House Press Secretary Robert Gibbs said, "It is clear that going forward, more will be required from everyone involved—creditors, suppliers, dealers, labor and auto executives themselves—to ensure the viability of these companies going forward." It was the genesis of Obama's "shared sacrifice" pitch to the country.

Following the bailouts (the "B-word") of the banks and Wall Street, the two automakers, their finance arms, and their suppliers could apply for the bulk of available TARP funds for auto—about $82 billion in conditional loans to be paid back with interest.

By now, Americans were getting sick of the B-word and watched as corporate giants were rescued but Main Street went empty-handed. It led to a new rage brewing across the country.

The whole restructuring was history in the making. A new chapter of the American car wars was being written. Rather than fighting against the foreign rivals on US shores, the war had become domestic.

It was these government and automaker-controlled scenarios that set up a chain of events that would cause the collapse of car dealers, who would be cut en masse about four months later. The unraveling of the American free-enterprise system in auto retail was set in motion. There were no street signals as the collision course between automakers, the government oversight group, and auto dealers was paved.

All systems were "Go," following the task force involvement.

Two iconic automakers, GM and Chrysler, became part of a rescue operation that would lead to the demise of a good portion of car dealers, considered among America's original entrepreneurs, who were all independent business people. Dealers were often among the highest taxpayers and bigger employers in their communities, a factor that went largely ignored by the power players.

The competition was fierce between the three domestics and between domestics and imports (also called "transplant automakers") with US factories. There was even competition between the brands in the various companies. It had come down to every customer, every deal, counted.

Fueling the controversy, some auto critics erroneously believed that the imports sent their profits back to the mother country, such as Japan. Automakers such as Toyota maintain that a majority of their US profits are reinvested in the US and North America, with US investments standing at about $18 billion, according to company spokespersons and the media website. Toyota, for example, says it has thirteen US plants, with a new one to open in Mississippi, and counts more than two hundred thousand American jobs; even more if dealers and suppliers are factored in.

Dealers Tighten the Reins

While the auto rescues were unfolding, the "new normal" was seen in belt tightening around the country in early 2009. Americans everywhere were feeling the pinch as jobs, savings, and benefits spiraled downward. The John Darvish family, who ran DARCARS Automotive, was tightening the reins too, adjusting to a new and tough economy at their Maryland-headquartered dealerships in Silver Spring. They had lost two Chrysler stores and one GM dealership in the automaker cullings.

Like many dealers, the Darvishes did all the right things—taking care of customers, and trying to keep their employees working rather than laying them off in a severe economic recession. They paid huge taxes. They also contributed to or chaired major philanthropic and community events that raised more than $2 million a year, part of their corporate and personal philosophy.

Tammy Darvish, a mega-dealer's daughter, held the title of executive vice president at the dealerships. She held the title but was concerned about the lavish displays of excess she had seen with the automakers. Maybe it was her upbringing, but she tried hard to live within her means. She shopped at Kohl's, Macy's and Target like many Americans do. She often cooked at home on weekends and wore duct tape on her shoes to preserve them as she roamed the dealership grounds. Like her customers, she loved a good bargain.

"There's a great sale at Kohl's this weekend," she said in a call to her cousin, Mina Gharib, who also worked in the family dealerships. "Want to go at lunchtime?" She sometimes ran errands whenever she could grab a minute. She would often buy supplies and groceries in bulk at Costco Foods for parties and large meetings. She wasn't above trying to save money in running her dealerships and household affairs.

A lecture to her two children might be that they couldn't have the latest gadget or gizmo just because they wanted it, or because other kids had it. Her teenage years of growing up watching every penny reinforced the value of working for what you get.

Rob Smith, Darvish's colleague at Fitzgerald Auto Mall in nearby Kensington, Maryland, often commiserated with her on child care and dealership issues. Few people knew that Smith was a single father of three children, aged four, fourteen, and seventeen, who lived with him full time.

Darvish and Smith knew one another from countless industry meetings, but became friends as the dealer crisis unfolded. Together their "shared sense of humor and practical jokes would carry us through some difficult times ahead," Smith said. In an industry known for long hours where balancing family and work is already tough, it was even more so when you had to go it alone. He was also a no-frills vice president and right hand to dealer Jack Fitzgerald. "I've got the kids tonight," he'd say, rushing out to pick up a child in day care before running to a meeting at the high school for another child.

To his boss, Jack Fitzgerald, he'd say, "See you in the morning; call if you need anything," as he departed with his laptop and paperwork in his briefcase to tackle at night. The car ride home meant a recap of the day with Darvish about contacts made, any must-dos for the evening, and plans for next steps. There was often a phone call at night to check strategy.

Smith said, "I have the ability to cook, but no longer have the time." So meals often were on the run. Some nights his teens had to go it alone and put the youngest to bed if his meetings went long into the night, as they did when negotiations between dealers and automakers started. He realized at times he would have to hire two to three people to do the job of a typical at-home parent. He tried to do it all.

His work morning typically started at 6:00 a.m. as he checked news stories online about dealer activities, made calls, and handled e-mails on his home computer. After seeing his older children off to school on their 6:40 bus and driving the youngest to day care, he would arrive at work by 8:00 a.m. to prepare for meetings at work or on Capitol Hill. Dealership employees across the country were going through similar routines, tightening up, making do with less.

* * *

In 2008 and leading into January 2009, the country teetered on Depression-like economic conditions. Recall that troubled time period: the auto industry was near collapse. President Obama's new Democratic administration had inherited a huge budget deficit and a world of problems—from a banking and oil crisis to plunging real-estate prices and a credit freeze. The Iraq and Afghanistan wars were still rearing their ugly, expensive heads.

The economic crisis had gone global. Banks were drowning in debt, and the stock market had plunged. Health-care costs skyrocketed as everyday workers lost their jobs and older and younger Americans struggled to keep up. In autos, the domestic carmakers were hanging from a cliff by their fingernails. Sales had plummeted as middle-class purchasing power eroded. Small, medium, and big-time investors watched their savings, pensions, and 401Ks vanish. Once known as the "Big Three," the automakers were now called the "Detroit Three": GM, Ford, and Chrysler.

An interesting sidebar: in December, right before Bush departed, Steve Feinberg, founder and CEO of Cerberus, the private equity firm that owned most of Chrysler, wanted to sell Chrysler to the outgoing government. The asking price? One dollar. A steal. The offer was refused, laughed at in White House meetings.

Chrysler CEO Bob Nardelli could perhaps see the train coming toward him. He had been pursuing partners to merge with or take over the ailing giant. Like the unpopular boy who couldn't get a prom date, he came home alone. He had approached Rick Wagoner at GM, Alan Mulally at Ford, and the much-acclaimed Carlos Goshn at Nissan-Renault, widely recognized as perhaps the best CEO in the business. He got "no thanks" from all. He contacted creditors and tried to call in favors. The answer was always the same. No, no, no. A thousand times no.

(Continues...)



Excerpted from OUTRAGED by Tamara Darvish Lillie Guyer Copyright © 2011 by Tamara Darvish and Lillie Guyer. Excerpted by permission of iUniverse, Inc.. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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