Politics: Daily Briefing: GM losing 49K on every Volt it builds

Published by: Clark Barrow on Monday September 10th, 2012

Clark Barrow

By CLARK BARROW - More business brilliance from Goverment Motors.

DAILY BRIEFING - SUMMARY

· FEDERAL RESERVE - A wide range of economists expect the U.S. Federal Reserve to restart balance-sheet-expanding bond buying in a bid to spark better growth rates, amid other, lesser stimulus options.

· CONGRESS - Fresh off a five-week vacation, lawmakers return to Washington, D.C. on Monday for a pre-election session in which Congress will do what it often does best: punt problems to the future.

· WHITE HOUSE - The White House missed the legal deadline for delivering a report to Congress on the spending cuts from sequestration that is scheduled to take effect in 2013.

· GOVERNMENT MOTORS - Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.

· STRATEGIC PETROLEUM RESERVE - Obama administration officials told energy experts this week they worry a release of crude from U.S. emergency reserves would do little to temper global oil prices partly driven by tighter supplies of refined fuel like gasoline.

· CHICAGO - The Chicago Teachers Union announced Sunday night that it will go on strike Monday morning for the first time in 25 years after contract talks with the school district failed over issues including pay, benefits and job security.

· IRAN - Despite what the Obama administration calls some of the toughest economic sanctions ever imposed, including a European Union oil embargo and a U.S. ban on financial institutions doing business with Iran's central bank, Tehran is finding legal ways to sell or barter oil to its most important markets in Asia.

WHAT WE KNOW

ECONOMIC NEWS

· FEDERAL RESERVE - A wide range of economists expect the U.S. Federal Reserve to restart balance-sheet-expanding bond buying in a bid to spark better growth rates, amid other, lesser stimulus options.

o For most forecasters, the release Friday morning of tepid-at-best August hiring data essentially seals the deal that when the central bank ends its two-day monetary-policy meeting next Thursday, it will in some fashion offer fresh stimulus to the economy. The way economists see it, comments by core central bank officials, most notably Chairman Ben Bernanke‘s speech a week ago, make some form of action very likely.

o The primary paths available to the Fed are expanding the central bank balance sheet with new Treasury and mortgage bond purchases: the so-called QE3 option. The central bank can push out even further into the future language that indicates zero percent short term interest rates will be stay in place for years to come. It could also lower or even turn negative the rate it pays banks to keep reserves at the Fed.

· JOBLESS - The number of Americans whom the U.S. Department of Labor counted as “not in the civilian labor force” in August hit a record high of 88,921,000.

o The U.S. Labor Department counts a person as not in the civilian labor force if they are at least 16 years old, are not in the military or an institution such as a prison, mental hospital or nursing home, and have not actively looked for a job in the last four weeks. The department counts a person as in “the civilian labor force” if they are at least 16, are not in the military or an institution such as a prison, mental hospital or nursing home, and either do have a job or have actively looked for one in the last four weeks.

o In July, there were 155,013,000 in the U.S. civilian labor force. In August that dropped to 154,645,000—meaning that on net 368,000 people simply dropped out of the labor force last month and did not even look for a job.

o There were also 119,000 fewer Americans employed in August than there were in July. In July, according to the U.S. Bureau of Labor Statistics, there were 142,220,000 Americans working. But, in August, there were only 142,101,000 Americans working.

· Monday morning futures on the Dow Jones Industrial Average fell 16 points to 13,280.

· Monday morning futures on the S&P 500 Index lost 2.7 points to 1,435.50.

· Monday morning futures on the Nasdaq-100 slipped 4.75 points to 2,818.25.

COMMODITIES

· The U.S. national average for a gallon of regular gasoline is $3.82.

o When President Obama was inaugurated, in January 2009, the U.S. national average for a gallon of regular gasoline was $1.85. Average gasoline prices are currently 106 percent higher than they were when Mr. Obama became president.

· Crude oil for October delivery advanced 7 cents to $96.49 a barrel on the New York Mercantile Exchange.

· Gold for December delivery fell $4.40 to trade at $1,705.60 an ounce on the Comex division of the New York Mercantile Exchange.

NEWS TO WATCH

· ELECTION - As of today, there are 67 days until the November 2012 presidential election.

· CONGRESS - Fresh off a five-week vacation, lawmakers return to Washington, D.C. on Monday for a pre-election session in which Congress will do what it often does best: punt problems to the future.

o They face a slew of deadlines and the prospect of a debilitating "fiscal cliff" in January, yet are expected to take a pass on the big issues of taxes and spending cuts. Their focus seems to be on the bare minimum, preventing a government shutdown when the budget year ends Sept. 30.

o Topping the agenda of substantive business is a six-month temporary spending bill to finance the government's day-to-day operations. The annual appropriations process on Capitol Hill collapsed about midway through the campaign season. The stopgap measure would give the next Congress time to fashion a full-year plan. There would be no more sure way of driving Congress' approval ratings even lower than for lawmakers to stumble into a government shutdown right before the Nov. 6 vote.

· CONGRESS - A long-stalled proposal in Congress that could make it easier for homeowners to refinance their mortgages is gaining new support, offering a chance for the White House to shore up a vulnerable housing record heading into the final stretch of the election campaign.

o Backers hope that the White House sponsored refinancing bill would make it possible for more homeowners to refinance their mortgages with any lender under an existing government program, allowing them to shop around for the best rate. It would also eliminate certain fees that Fannie Mae and Freddie Mac charge, lowering the cost of refinancing.

o Even if the measure passes the Senate, it faces an uncertain fate in the Republican-controlled House. But it could help President Barack Obama defend against criticism that he hasn't done enough to deal with the housing bust, particularly in key swing states such as Florida and Ohio, where many borrowers are underwater.

· WHITE HOUSE - President Obama resumed his attack Sunday on the Romney-Ryan plan to save Medicare, this time referring to a study that he said shows skyrocketing costs for future recipients and further distancing himself from the dismal unemployment report released last week.

o The attack marks the second straight day that the president has gone after the GOP plan, after the August unemployment report released Friday showed the U.S. unemployment rate dropped but only because more Americans quit their job search.

o Obama also said the plan by GOP presidential nominee Mitt Romney and running mate Rep. Paul Ryan would increase insurance profits by $16 billion to $20 billion and that he would not follow their plan to turn Medicare into a voucher system. Cutler is a Harvard professor and health policy expert who served in the Clinton administration and was Obama's top health care adviser during the 2008 presidential campaign. He conducted the study for the liberal Center for American Progress Action Fund.

· WHITE HOUSE - The White House missed the legal deadline for delivering a report to Congress on the spending cuts from sequestration that is scheduled to take effect in 2013.

o Under the terms of the Sequestration Transparency Act signed in August, President Obama was to tell Congress by Friday, September 7, 2012, how the administration plans to implement the $109 billion in automatic cuts mandated by the Budget Control Act.

o The sequestered cuts coming in January were triggered by the failure of the 2011 supercommittee to reach a compromise on deficit reduction. The Pentagon says the looming defense cuts will devastate the military. The deal also cuts non-defense spending, but shields most entitlement benefits.

PRESIDENT’S SCHEDULE

· President Obama does not have any public events scheduled for today.

HAPPENING IN THE U.S. CONGRESS

U.S. SENATE

· The U.S. Senate is in session today.

U.S. HOUSE OF REPRESENTATIVES

· The U.S. House is in session today.

TOPICS OF INTEREST

NATIONAL SECURITY

· CYBERATTACK - The Obama administration has drafted a preliminary executive order aimed at strengthening the nation’s computer systems against attack, an effort to begin to accomplish through fiat what could not be achieved through Congress.

o The draft order, whose contours are being debated, would create voluntary standards to guide companies in guarding themselves against cyberattacks, according to administration officials. It would also establish a special council made up of key government agencies to identify threats that could compromise critical sectors.

o Compromise legislation to bolster the nation’s defenses against cyberattacks that could affect electric grids, communications networks and other critical infrastructure failed this summer in the face of strong opposition from the Chamber of Commerce and Republicans who decried even voluntary standards as a regulatory burden on business.

FEDERAL GOVERNMENT

· GOVERNMENT MOTORS - General Motors Co sold a record number of Chevrolet Volt sedans in August — but that probably isn't a good thing for the automaker's bottom line. Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.

o Cheap Volt lease offers meant to drive more customers to Chevy showrooms this summer may have pushed that loss even higher. There are some Americans paying just $5,050 to drive around for two years in a vehicle that cost as much as $89,000 to produce. The Volt has a base price of $39,995.

o The car entered production in the fall of 2010 as the first U.S. gasoline-electric hybrid that could be recharged by plugging the car into any electrical outlet. The Obama administration, which engineered a $50-billion taxpayer rescue of GM from bankruptcy in 2009 and has provided more than $5 billion in subsidies for green-car development, praised the Volt as an example of the country's commitment to building more fuel-efficient cars.

o The U.S. Treasury Department said in August 2012 that it expects to lose more than $25 billion on the $85 billion auto bailout. That's 15 percent higher than its previous forecast.

ENERGY

· STRATEGIC PETROLEUM RESERVE - Obama administration officials told energy experts this week they worry a release of crude from U.S. emergency reserves would do little to temper global oil prices partly driven by tighter supplies of refined fuel like gasoline.

o At an informal consultation on Thursday, mid-level officials from the National Security Council, the Department of Energy and other bureaus made clear a top concern was tight oil product markets caused by constraints in refining capacity, two outside energy experts who attended the meeting said on Friday.

o The meeting coincides with rising speculation President Barack Obama may order a release of oil from the Strategic Petroleum Reserve (SPR) to control high gasoline prices and prevent high crude prices from undermining sanctions on Iran.

EDUCATION

· CHICAGO - The Chicago Teachers Union announced Sunday night that it will go on strike Monday morning for the first time in 25 years after contract talks with the school district failed over issues including pay, benefits and job security.

o More than 26,000 teachers and support staff are expected to hit the picket lines Monday morning, while the school district and parents carry out plans for keeping nearly 400,000 students safe and occupied during the day in the nation's third largest school district.

o The district had been offering a raise of 2 percent a year for four years. The union called that offer unacceptable — particularly after Mayor Rahm Emanuel last year canceled a previously negotiated 4 percent pay raise, citing budget problems. The union countered by asking for a 30 percent pay raise over two years, followed by a request for a 25 percent increase over two years. Just weeks ago, the union had adjusted its demand and was asking for a 19 percent pay raise in the contract's first year.

FOREIGN POLICY

MIDDLE EAST

· SYRIA - The Syrian government accused France of “schizophrenia” on Sunday for pledging to support a peaceful resolution to the uprising against President Bashar al-Assad and simultaneously aiding the armed groups driving the insurrection. At the same time, a French doctor returning from a rebel-controlled hospital raised new alarms about the presence of foreign Islamist militants in Syria, stoking fears that have discouraged the West from more forceful support for the rebels.

o As the fighting continued, the Syrian military closed in on the neighborhood that was once the Yarmouk refugee camp in its drive to squeeze the rebels out of the suburbs south of the capital, Damascus. The government’s forces blasted opposition strongholds with tanks, artillery and helicopter gunships. In a government-controlled neighborhood in Aleppo, Syria’s largest city, rebels set off a bomb that state news media said killed 17 people and wounded more than 40.

o Days after the French government said that it would provide humanitarian and reconstruction assistance directly to the rebels controlling five Syrian cities, a spokesman for the Syrian government accused France of undermining the first trip to the region by the new United Nations envoy charged with negotiating a peace, Lakhdar Brahimi.

· IRAN - Despite what the Obama administration calls some of the toughest economic sanctions ever imposed, including a European Union oil embargo and a U.S. ban on financial institutions doing business with Iran's central bank, Tehran is finding legal ways to sell or barter oil to its most important markets in Asia.

o The new deals are expensive, time-consuming and risky. But experts say they are easing some of the burden on Tehran's battered economy and buying time for Iran's leaders as Washington and its allies scramble to curb the country's nuclear program.

o The legal loopholes in the sanctions system, plus Iran's estimated $100 billion in cash reserves, could allow Tehran to muddle through for several months and perhaps longer before its economy shows major strains or nears collapse, experts say.

· IRAQ - Car bombs tore through mainly Shi'ite Baghdad districts on Sunday after Iraq's fugitive Vice President Tareq al-Hashemi was sentenced to death, as more than 100 people were killed across the country in one of the bloodiest days this year.

o Hashemi's sentencing in absentia and the violence threatened to further stoke sectarian tensions in Iraq where a Shi'ite-led government is battling political deadlock and a Sunni Islamist insurgency nine months after U.S. troops left.

o A senior Sunni politician, Hashemi fled Iraq after the authorities issued a warrant for his arrest in December, a move that threatened to collapse a fragile power-sharing deal among Shi'ite, Sunni and Kurdish blocs.

AFRICA

· EGYPT - A delegation of more than 100 American business leaders is touring Cairo this week, part of a White House-led effort to burnish Egypt's image as an investment destination and help restore the country's flagging economy.

o The delegation forms the crux of a wider U.S.-led effort to prevent the economy of Egypt—which the U.S. sees as an important security ally—from becoming more destabilized.

o The U.S. and Egypt are in the midst of negotiating the terms for about $1 billion in debt relief and U.S. diplomats have said they are nudging the International Monetary Fund toward extending a $4.8 billion loan to Egypt's government.

ASIA

· AFGHANISTAN - The U.S. military prison in Afghanistan known as Bagram, infamous for its association with abuse of detainees during the 11-year war against al-Qaeda and the Taliban, was officially transferred to Afghan control Monday.

o The long-demanded handoff occurred amid tensions between Washington and Kabul over the Afghan army’s ability to guarantee security at the prison, and the Afghan court system’s preparedness to competently adjudicate detainee cases.

o Even some Afghan officials fear that the courts will end up releasing dangerous captives, because judges often don’t accept evidence gathered from intelligence sources. The United States has held suspected militants for years on the basis of classified, undisclosed evidence, drawing international criticism.