My Thursday column for the FT is on the president’s fuel-efficiency standards:

It was, the president declared, “an extraordinary gathering”. Bounding into the White House rose garden for his latest policy pronouncement, Barack Obama this week unveiled his plan to limit US petrol consumption and reinvigorate the domestic motor industry.

Compared with what had preceded it, it was extraordinary, for not only did he unveil a rise in fuel efficiency standards after years of drift, but his administration had also hammered out a consensus among government agencies, states led by California, and auto companies.

In the sweep of history, however, it was very ordinary indeed. Yet again, a president was placing his faith in government regulation to limit his countrymen’s fondness for big, gas-guzzling vehicles.

Instead of the simplest, most obvious and least expensive way of achieving that end – raising the national excise tax on petrol – the president was again relying on a complex, dirigiste intervention.

You can read the rest of the column here and comment below.

There are many contenders for the most disastrous enterprise in the financial crisis: Fannie Mae and Freddie Mac, Lehman Brothers, Merrill Lynch, AIG etc. For my money (literally, since I am a US taxpayer) it is hard to beat General Motors.

GM is still in intensive care, relentlessly absorbing public money with no obvious end in sight. Banks may be starting to look a bit healthier, but GM keeps on getting sicker.

This week, we learned that GM, which has so far taken $15.4bn of public money, will need $9bn more this year. It is bleeding cash at an accelerating rate, could enter Chapter 11 bankruptcy, and has amassed losses of $88bn since 2004.

Then came this evening’s stress tests on US banks, which found that GMAC, its financing arm, needs an additional $11.5bn in capital to remain adequately financed in the next couple of years. It is not at all obvious where this will come from, apart from the public purse.

GMAC has common equity of $11.1bn at the moment so, relative to its size, the hole in its balance sheet is the biggest of the 19 financial institutions subjected to stress tests.

The worst thing about GMAC is that, while large banks such as Bank of America can partially earn their way out of the hole they are in, it is stuck. The stress test estimates that, while Bank of America could pump out $74bn in net revenue in the next couple of years, GMAC will lose a further $500m.

GMAC’s problems are tied to those of GM, since it used its finance arm, formed in 1919, to provide cheap finance to consumers who would not otherwise have bought its cars.

Indeed, the GM/GMAC malaise did not just damage the US economy - it extended to other countries where GM operated. Here is what Bernstein Research had to say on its influence in a recent report on the European market:

GM has been a deflationary force on pricing – both in the US and Europe – for many years. Having historically refused to reduce manufacturing capacity, product offering and dealer density, GM has always resorted to aggressive pricing. GM has been the leading exponent of over-supply, cheap financing and deflationary strategies . . . GM has been selling hundreds of thousands of “brand new second-hand cars” each year - vehicles for which there is no real consumer demand but that go quickly to second-hand via daily rental fleets, employee discounts and other routes.

We now know that this not only pushed GM towards insolvency but has brought low its finance arm as well. Both are heavily dependent on the largesse of the US government.

Yes, as financial disasters go, that is hard to beat.

Update: Felix Salmon suggests that GMAC’s bondholders could end up owning it and “good luck with that”. Indeed.

I note from this Financial Times story that Germany may require the Fiat-Opel-Chrysler auto group that Sergio Marchionne is attempting to assemble to be headquartered there.

This is one of the 14 criteria mooted by Frank-Walter Steinmeier, vice-chancellor and foreign minister, for any bidder for Opel - currently the European arm of General Motors - to obtain financial support from the German government.

It sets the scene for what could be an interesting face-off between national governments over the identity of cross-border groups that they have helped to support. The US government, which is providing finance for Chrysler, may well have something to say.

Apart from this, I wonder how Chrysler’s employees and dealers would feel about once again falling under the control of a German company, albeit one with an Italian accent?

Their last experience of such arrangements - DaimlerChrysler - was not exactly an unalloyed success.

Unlike Barack Obama and others, I have sympathy for the hedge funds and other investment funds that rejected the Chrysler restructuring offer and forced it into Chapter 11 bankruptcy.

In fact, not only do I sympathise with their argument, but I think they have a better chance of getting improved terms from the bankruptcy court than the US administration would have us believe.

Here is what President Obama had to say on the topic this morning:

While many stakeholders made sacrifices and worked constructively, I have to tell you some did not. In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout. They were hoping that everybody else would make sacrifices, and they would have to make none. Some demanded twice the return that other lenders were getting. I don’t stand with them. I stand with Chrysler’s employees and their families and communities. I stand with Chrysler’s management, its dealers, and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars. I don’t stand with those who held out when everybody else is making sacrifices.

And here is Felix Salmon, chiming in:

As for the smaller creditors who stood in the way of a deal which would have avoided bankruptcy, I have very little time for their plaints. They’re offering nothing which will help Chrysler in the future: they just want to get the maximum return on selling the bonds they picked up for pennies on the dollar. I hope and trust that the bankruptcy judge will give them short shrift.

Well, that all sounds reasonable. Hurray for the big banks, which are recipients of government money, being nudged into taking 33 cents on the dollar. Hurray for Chrysler and its workers. Boo to all those nasty hedge funds and “speculators”.

Well, yes except that some of these “speculators” inconveniently manage money on behalf of pension plans and endowments, rather than rapacious rich people. They have a fiduciary duty to get the best deal they can on behalf of their investors.

I also take seriously their point that, although they are higher up in the ranks of creditors than Chrysler’s unions, notably the UAW, they were offered less for their investments.

According to their statement:

Under long recognized legal and business principles, junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full. Nevertheless, to facilitate Chrysler’s rehabilitation, we offered to take a 40 per cent haircut even though some groups lower down in the legal priority chain in Chrysler debt were being given recoveries of up to 50 per cent or more and being allowed to take out billions of dollars.

President Obama is trying to use the bully pulpit of the presidency to shove these investors into taking a worse deal than they could ordinarily expect under Chapter 11. The Tarp-funded banks that voted for the deal were no doubt aware of how they might by pilloried if they did not do so.

But there is a decent chance that the bankruptcy judge will ignore all of this poltical grandstanding in favour of longstanding legal principles, and so he or she should.

Update: Andrew Leonard is also unhappy about the “vultures”. I do find it odd that one set of people who pursue their financial self-interest is regarded as OK, while another set is regarded as villainous.

It seems that Chrysler could eventually end up under the majority ownership of the UAW, its main union, with Fiat holding a minority stake. It sounds awfully like the revisiting of a past era.

In the 1980s, there was a rash of employee-owned companies emerging out of troubled private ownership. In 1994, United Airlines became majority owned by its employees after all else had failed.

The employee share ownership movement was popular as an alternative to bankruptcy for unionised companies in financial trouble. It was supposed to cement the commitment of workers.

But it did not deliver the goods.

United Airlines went bankrupt in 2002, despite hopes that co-operation between management and the unions would solve previously intractable problems.

Now, the UAW reportedly stands to gain a 55 per cent stake in return for giving up contract entitlements. This is intended to head off the threat of Chrysler’s going into Chapter 11 bankruptcy.

I wish I felt more optimistic about it. The Obama administration has declared that it sees no future for Chrysler as an independent company and has pressed for it to strike a deal with Fiat.

But who knows what obstacles lie with a union-dominated Chrysler depending on Fiat for its viability? It does not feel like a stable solution to its troubles.

This is my column on Asia and business brands in the FT:

Not long ago, Joanna Seddon, a marketing executive, lost a button on her Louis Féraud suit and looked for a store in New York or London at which to get it replaced.

Ms Seddon, an executive vice-president of Millward Brown, was out of luck: the late French designer’s New York store on Madison Avenue had closed. She had to turn to China, where Féraud has 11 outlets. A brand made popular in the US in the 1980s by the soap operas Dallas and Dynasty had gone east.

The realigning of Louis Féraud from the US to China is an unusual story but it is becoming more common. As it does, our postwar assumption that the US is the place where most global consumer brands get launched before being spread around the world is being undermined.

This week, Porsche chose the Shanghai motor show to launch its Panamera four-door saloon, the fourth Porsche line after the 911, the Boxster/Cayman and the Cayenne (a US-oriented sports utility vehicle).

This time, there is no mistaking the Asian influence on Porsche’s product development. The Panamera is a global model but its length – nearly as long as the stretched Series 5 that BMW made for China – tells the story. Rich car buyers in China prefer to be driven by chauffeurs.

The car industry is a leading indicator. The US slump has led to China turning into the world’s largest car market this year, accentuating a long-term shift towards Asia.

You can read the rest here and comment below.

Today’s Shanghai launch of the Porsche Panamera, its first vehicle launch since the 2002 Cayenne sports utility vehicle launch in 2002, shows which way the wind is blowing in the global car industry.

The Cayenne was built with the US market in mind but the Panamera - Porsche’s first saloon/sedan car - has an Asian tilt. The Chinese car market has become the second most important luxury car market in the world, and the Panamera is being launched there in January.

One distinctive quality of the Chinese market is that rich consumers often employ a chauffeur to signal their elevated status and they prize long wheelbase cars. BMW even makes a long wheelbase Series 5 car for the market - a rare variation on its global product approach.

The Porsche Panamera is not exactly a stretch limousine, but it is 16 feet long - just a fraction shorter than BMW’s extended Series 5. That should allow the back-seat passengers to travel in comfort.

I suspect that what goes for the luxury market obtains more widely. The crisis in the US auto market - and the fall of Detroit - will further undermine its dominant status.

We are seeing Chrysler’s reliance on Fiat to produce a small car for the US market, while vehicles in which the US auto manufacturers have specialised - vans and light trucks - are less popular.

My FT column this week is on Detroit and the failure of shareholders:

When is a shareholder activist not a shareholder activist? When he is the US president.

Barack Obama this week did what shareholders of General Motors, even the renowned Kirk Kerkorian, had failed to do. He removed Rick Wagoner from GM’s helm after nearly a decade and told the board that most of its members should be on their way too.

Mr Obama was perfectly justified. “The only thing you have to do is look at a chart that shows how much value we [as an industry] have collectively destroyed in the last 20 years,” Sergio Marchionne, Fiat’s chief executive, told Automotive News in December: “In any normal world … the very first thing you would say is: ‘Give me the names of the guys who did this! I want them all out.’ ”

But why did it take the president and a taskforce led by Steve Rattner and Ron Bloom to see through the latest of GM’s endless restructuring plans and show Mr Wagoner the door? Why were GM’s executives and board allowed by its shareholders repeatedly to steer the wrong way?

It is popular in Detroit to regard the local industry as having particular problem relationships – with everyone from unions to suppliers and dealers – that make it uniquely hard to run. It is also accepted wisdom that enterprises such as GM can only be run by a Detroit “car guy”.

The industry is certainly complex, difficult and highly competitive, with chronic overcapacity that means that plants run at an average of only 75 per cent of potential. Even with GM bleeding cash at such a rate that Mr Obama waved the stick of Chapter 11 bankruptcy proceedings, he turned to Fritz Henderson, another GM lifer, to take over from Mr Wagoner.

But the industry is not as unusual as it likes to believe. Most of its problems were caused not by the nature of cars but standard-issue mismanagement, tolerated for decades. The inability, or unwillingness, of shareholders to enforce clearly needed changes is also found elsewhere.

Take Wall Street banks. Perhaps regulators were looking the other way, but why did investors allow investment banks to run excessively illiquid and leveraged balance sheets and pay their senior executives so much that they had little incentive to restrain their employees?

It is hardly news that shareholders in US companies have limited rights to influence strategy, or even be heard, by boards of directors. But since GM shareholders and Cerberus Capital Management, Chrysler’s owner, have lost most of their money, it is worth reflecting on the lessons

You can read the rest of the column here and comment below.