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Weekly Recap: Obama reflects on the auto bailout's legacy

President Obama took a victory lap of sorts this week at the Detroit Auto Show, lauding the industry's progress and reflecting on the decision to bail out General Motors and Chrysler seven years ago. While the rescue was controversial at the time, historians will likely judge the president's actions to help save two of America's industrial symbols in a positive light. Much like Theodore Roosevelt's trust-busting tactics were controversial in the early 20th century, Obama's plan drew fire from critics who argued the free market should be left to its own devices. But providing financial aid and forcing the automakers to restructure had an enduring impact on the US economy. The auto industry has added more than 646,000 jobs since the companies emerged from bankruptcy, including manufacturing and retail positions. Make no mistake, GM and Chrysler were nearly dead in 2009. Now, GM is a powerhouse that's set to capitalize on a market that could see 18 million vehicles sold this year. Chrysler, which was renamed FCA US, survived as part of the Italian-American Fiat Chrysler Automobiles conglomerate. It's also performed well amid the strong industry conditions, though CEO Sergio Marchionne very publicly went looking for alliance partners last year, something from which he's since backed off. While Obama can claim a win, the bailout was actually started by George W. Bush, who provided short-term loans to GM and Chrysler in December 2008. Without that, they might not have made it much past Obama's inauguration. NEWS & ANALYSIS News: Spy Shooters captured the next-gen BMW Z4 during extreme cold weather testing. Analysis: The upcoming Z4 (which might be called the Z5) looks sharp. But the big deal is that BMW's much-anticipated sports-car project with Toyota is coming to fruition. Refresher: BMW and Toyota agreed to work together back in December 2011 and then announced an expansion of that deal to include sports cars in June 2012. Ultimately, it will provide BMW with a new Z4 and Toyota with another sports car, perhaps the Supra replacement. BMW is developing the platform, while Toyota is expected to chip in with hybrid technology. Big picture, this project is a good thing. It's providing enthusiasts with two modern sports cars that Toyota and BMW might not chose to develop on their own. This template has been shown to work, as the Fiat-Mazda alliance produced the MX-5 Miata and 124 Spider. News: The Jeep Grand Cherokee Hellcat was also spied, briefly.

UAW ratifies FCA contract

The second time was apparently the charm for the proposed contract between the United Auto Workers and FCA US as 77 percent of union members have ratified the four-year deal, it was announced Thursday. "This agreement represents an investment in our US workforce and recognizes its contributions to the company's growth over the past six years." the automaker said in a statement. Now, the UAW must move forward on new arrangements with Ford and General Motors. After members rejected the original offer, UAW president Dennis Williams (pictured above, right) was positive about the new deal's acceptance. "The resolve of our membership and the dedication of our negotiating team has produced an agreement that affords UAW members a strong wage package and job security while still allowing the company to competitively produce high quality vehicles for our customers," he said in a statement. In contrast to the last offer, the new contract largely eliminates the two-tier wage system, and it's now it's possible to attain the same $29 per hour pay over eight years of employment. According to the Detroit Free Press, the deal also no longer limits FCA US from hiring entry-level workers. The original plan for a healthcare co-op across the Detroit automakers is also axed from the latest arrangement. While the strategy was supposed to lower costs, the potential changes weren't explained well to union members, and they rejected it. UAW FCA MEMBERS RATIFY NEW CONTRACT Featured / Negotiations / October 22, 2015 DETROIT – The members have voted to ratify a new four-year collective bargaining agreement with FCA by a 77% majority. The results of the voting are as follows: • Production workers – 77% • Skilled Trades – 72% • Salaried Bargaining Unit – 87% President Williams stated, "The recent bargaining process that took place on behalf of our members at FCA is a testament to the UAW's democratic values and commitment to our members. The resolve of our membership and the dedication of our negotiating team has produced an agreement that affords UAW members a strong wage package and job security while still allowing the company to competitively produce high quality vehicles for our customers." "UAW members at FCA have obtained a strong agreement that provides substantial wage gains, fairness in the workplace, and job security.

Buy Ford and GM stock and make 5%

Want to make a five-percent return when 10-year treasuries are paying around two percent? Ford (F) and General Motors (GM) have solid balance sheets, strong cash flow, solid earnings, and growing markets. By all accounts, they are smart investments. But the market is down on these stocks. Why? Some of the stupid excuses include: They are cyclical companies The Detroit 3 have lost 3.5 million in sales since 2000 The world economy is shaky GM recently filed for bankruptcy Their markets have peaked They haven't changed their ways Let's take these criticisms one by one: They Are Cyclical Companies Yes, they are cyclical. Every company is cyclical. Every industry is cyclical. Some more than others, but not every company is immune from swings in the market. Banks used to be 'non-cyclical' leader, not anymore. Airline stocks are just as cyclical as auto stocks, yet they are trading at multiples greater than the auto industry. Why? And what accounts for the irrational stock price for Tesla (TSLA)? At least Ford (F) and General Motors (GM) make money and have positive cash flows. In fact, both companies have a net positive cash position. They have more cash on hand than liabilities. Auto sales in the United States hit a record 17.5 million vehicles in 2015. During the Great Recession, Ford (F) and General Motors (GM) cut their break even points to 10 million vehicles per year. Anything above an annual U.S. volume of 10 million vehicles is profit. And what a profit they make. Sales of Ford's F-150 continues to be the best-selling vehicle in the United States for over 30 years. Detroit 3 Have Lost 3.5 million in Sales Since 2000 Automotive News reports General Motors (GM), Ford (F) and Chrysler (FCA) have lost a combined 3.5 million vehicles sales since 2000. So how can they be making more money? Two big reasons – Fleet Sales and the UAW. Fleet Sales The Detroit 3 used to own car rental companies to keep their factories running. Ford owned Hertz (HTZ), General Motors owned all of National Car Rental and 29 percent of Avis, and Chrysler, the forerunner to Fiat Chrysler (FCA), used to own Thrifty Car Rental and Dollar Rent-A-Car. The Detroit 3 owned these rental companies to have a place to sell their bad product and keep their factories running. These were low margin sales, and in many cases, were money losers for the Detroit 3. They no longer own auto rental companies.