"My Maserati does one eighty five,
I lost my license, now I don't drive."
-- "Life's Been Good," Joe Walsh

U.S. auto sales most likely will register yet another year-over-year decline when Big Three auto manufacturers report November sales on Tuesday.

But that's not to say that all segments of the auto market are in free-fall, revenue wise: sales of many high-end or luxury cars are doing just fine. Sales of many high-end luxury cars are flat or down just slightly this year, in contrast to double-digit declines seen in typical vehicle categories.

Ferrari's U.S. sales are down just 3%, Mazerati's sales are up 10%, and Rolls-Royce's sales have risen an eye-opening 32%, according to data collected by Autodata.

It's been a great decade . . . for the gentry

Economist David H. Wang said the luxury car statistics are consistent with a macro-consumption theme pervasive throughout the decade: for the most part, luxury brands and super-exclusive brands did well.

"One thing the decade's economic policies did accomplish was a substantial increase in wealth among upper income groups, especially the already wealthy and the super rich. Most people earning more than $300,000 a year have had their best decade ever," Wang said. "That's been very good for luxury product sales, like luxury cars, luxury homes, fine art, jewelry, and vacation homes. Unfortunately, the decade's income and wealth gains at the high end doesn't mean too much for broad-based consumer demand, and for the overall U.S. economy." Wang added that he does not have a rating on or an investment stake in any auto manufacturer.

When the CEOs of General Motors Corp. (NYSE: GM), Ford Motor Company (NYSE: F) and Chrysler again take the steps up to the U.S Congress tomorrow, they will again try to convince U.S. lawmakers that a $25 billion injection into all three companies will somehow stave off their collective death along with over a million U.S. jobs that would be lost if the three automakers cease to exist.

GM's Rick Wagoner, Ford's Alan Mulally and Chrysler's Bob Nardelli -- all of whom flew to the last meeting with Congress on expensive private jets -- will be back in action tomorrow to try for the second time to siphon $25 billion from the federal government. Oops, I mean, the U.S. taxpayer. A few weeks ago, the trio were labeled as unprepared and failed to convince the majority of Congress that $25 billion would allow all three companies to somehow retool their complete efforts pretty fast.

If Wagoner, Mulally and Nardelli can't make their vision compelling with facts, future plans, some kind of competitive strategy and a five-year layout on changes they will make, along with being held accountable to each of them, then the end of the American auto manufacturing triumvirate as we all know it may be the end.

Of course, like many pundits, I sincerely believe that this is all for show and that a structured bankruptcy is the "way out" for at least Ford and GM at this point.

Speaking of leaders, Ford's Mulally -- who has shown some excellent chops at trying to rescue Ford in his two plus years there -- may be the only CEO that needs to stay. Wagoner needs to go (actually, years ago), and why on earth Chrysler nabbed Home Depot shenanigan master Nardelli is beyond comprehension.

What are likely to be Congress's performance conditions for any rescue package for Big Three auto manufacturers General Motors, Ford, and Chrysler?

First, it should be noted that many Americans oppose any auto maker rescue/bailout, and the stance contains a legitimate point: that underperforming private companies shouldn't be rewarded for operational errors.

Still, a stronger argument holds that a cessation of U.S. auto company operations would severely hurt an already weak U.S. economy - - with an unacceptable increase in unemployment, particularly in the Midwest U.S., and other negative economic ramifications. Hence, Congress is very likely to pass and either President Bush/President-elect Obama will sign a performance-based rescue package.

The plan's performance metrics are likely to include:

• a credible, coherent plan for auto manufacturer viability and profitability;

• wage, benefit, and payment sacrifices by all stake holders: management, unionized employees, suppliers, dealers, contractors, shareholders, and creditors, etc.;

• the elimination of executive and management bonuses, if certain metrics are not me;

• a next-generation vehicle platform that reduces U.S. dependence on oil and that radically increases fuel efficiency/miles per gallon;

• debt-to-equity options, perhaps in the form of convertible bonds, that give the U.S. government the option of purchasing shares, should federal oversight officials choose to do so, to enable the government to share in any automaker's success;

• senior debt status for any U.S. government loans;

• full General Accounting Office access to auto maker financial records and business plans for the duration of the rescue package.
  

The first rule of public relations is never get in a fight with anyone who buys ink by the barrel. And a major tenet of investing is don't take a stock position in conflict with Congressional policy, once Congress has committed to a program.

The wisdom behind the second adage, like the first, is obvious enough: Congress has the ability to suddenly and substantially change the investment landscape.

Case in point: Congress, which is currently hearing testimony on a performance-based rescue package for General Motors (NYSE: GM), Ford (NYSE: F), and Chrysler, could end up further funding reform by the Big Three by buying millions of the companies' vehicles for the U.S. government's auto fleet.

'Catching three fish with one cast'

Economist David H. Wang says the tactic has appeal in several areas -- economic, industrial, energy.

"It would help the three companies retain essential employees while transforming their operations, it would keep more industrial spin-off jobs in the U.S., and it would save energy by increasing U.S. government auto fleet efficiency," Wang said. "It would be like catching three fish with one cast and I think the new Obama administration would look very favorably on the energy efficiency aspect, both private and public sector dimensions."

Shares of GM fell 30 cents to $2.79, while Ford declined 16 cents $1.52 in Wednesday morning trading.

First, the United States Congress should pass and the president of the United States should sign a rescue package for General Motors, Ford and Chrysler, post-haste.

If this was the "Roaring '90s" or even the "Fabulous '50s," an operational cessation by General Motors (NYSE: GM), Ford (NYSE: F) and Chrysler, would hurt the U.S. economy. As investors know, however, we are not in the 1990s or the 1950s, but in a teetering economy, and an auto sector cessation would be devastating, driving the U.S. economy into a deeper and longer recession.

Second, the notion that only companies that "perform" in the free market should continue and that others, the underperformers, should fail, as an absolute rule, simply has not been the history of the United States economy. Moreover, dozens of companies receive billions of dollars in subsidies from the U.S. government, which is you, the taxpayer.

Need a few examples? Let's do what the late, great New York Governor Al Smith would do: Let's look at the record.

As Detroit seeks a $25 billion bailout, the automakers are pinching pennies so hard that their fingers may start to bleed.

General Motors Corp. (NYSE: GM), which earlier this month axed 1,900 jobs, recently scaled back its presence at the Los Angeles Auto show and canceled its annual star-studded party at Detroit's North American International Auto Show, according to USA Today.

The largest automaker -- at least I think it still is, for now -- is keeping a tight lid on the distribution of office supplies. It's always a sign of a troubled company when the nice gel pens in the supply closet are replaced with cheap Bics that have a habit of exploding in your shirt pocket.

Of course, bonuses and holiday parties are things of the past for employees of GM, Ford Motor Co. (NYSE: F) and Chrysler LLC. Though these types of measures save money, they are like putting a kid's BandAid with a picture of SpongeBob on a patient with a gunshot wound. The reasons for these moves are as much political as financial.

About 29 years ago -- in August 1979 -- Chrysler was at death's door. It made gas guzzlers that nobody wanted to buy and it asked for $1 billion to keep itself going until a fleet of more fuel efficient cars could take up the sales slack. If it failed, a Congressional Budget Office study said that 360,000 jobs would be lost.

The U.S. turned down Chrysler's request and offered loan guarantees to encourage banks to make Chrysler the loans it needed to cover its $100 million a month operating expenses until the new car line could hit the dealer floors. That story had a happy ending -- and offers some lessons for the current situation.

Except for the much smaller numbers this story sounds much like the plight of General Motors (NYSE: GM) . As I posted, GM is trying to convince the Congress that it will fail without a $25 billion bailout and that such a failure would cost 2.5 million jobs and $125 billion in lost economic activity. It remains to be seen whether the U.S. will come through with the money that GM wants.

Detroit's Big Three automakers are finding out assistance is a two-sided process.

President-elect Barack Obama is backing a plan in which U.S. automakers would receive $50 billion in federal aid in exchange for structural changes and oversight by an auto czar or board. An auto czar or board would be patterned after the bailout of Chrysler in 1979 or the City of New York in 1975.

During those two assistance / loan guarantee efforts, the U.S. Government ended up making money on the deals. The revamped Chrysler returned to profitability and actually led both General Motors and Ford in several vehicle categories in the ensuing decades. The streamlined, pro-business City of New York experienced an economic, civic, and cultural renaissance in the 1990s that was surpassed only by the 'Roaring 20s.'

Economist David H. Wang told BloggingStocks Thursday a bankruptcy by General Motors or Ford "is economically and psychologically unacceptable." If both filed for bankruptcy and operations were disrupted, "U.S. unemployment would soar over 10%" and the U.S. economy would incur into its deepest recession since the 1981-82 Reagan Administration recession, he said.

There's an old academic joke that goes, 'Put two economists in a room and you have a conversation. Put three economists in room and you have enough for a new world order, or disorder.'

One of the topics that came up at a recent economists chat attended by yours truly concerned not the global economic order, but the state of corporate America and moral hazard.

Is 'gov' insurance encouraging corporate abuses?

Most economists agree that banks and comparable financial institutions (FI) critical to the financial system should be backstopped by the U.S. Government, at least to some degree. A backstop is particularly critical if a bank failure would create systemic risk, i.e. jeopardize the financial system. The recent bank rescue and AIG (NYSE: AIG) takeovers are two examples.

More recently, however, a push has been made by various lobbies (corporate, labor union, regional states, among others) to rescue key industrial institutions, with the ailing auto companies, General Motors (NYSE: GM), Ford (NYSE: F), and Chrysler being front and center. Moreover, the logic of an auto sector rescue is reasonable enough: the economic and social consequences of a failure by one or more auto companies would be far worse than the costs of a government rescue.

One of the options in the current auto industry crisis that Detroit does not like to talk about is that one or all of The Big Three may be broken into pieces and auctioned off. It may be a fairly good idea, although it would probably not read well as a headline in the two dailies in The Motor City.

According to Reuters, "The $11.7 billion the struggling automaker said it had as of end-June has seen a substantial decline because of the company's deteriorating performance marked by a 35 percent slide in October sales and increasing cash incentives.

Since Ford (NYSE:F) recently sold Jaguar and Range Rover and GM (NYSE:GM) is trying to sell Hummer, breaking auto firms into parts does have recent precedent. Ford reportedly got about $2 billion off its two small luxury brands. But, that was before the worst part of the auto sales downturn hit.

Chrysler has several small units like its Mopar parts division, but the value in the company is its three units: Jeep, Chrysler, and Dodge. Some of the Chrysler models like the "300" series still sell well. Dodge has pick-up and sports car franchises which may not be worth much. The Jeep brand may be more valuable than the other two. Demand for four-wheel drive vehicles may not be strong in the U.S., but it is in a number of emerging countries.

Valuing Chrysler is difficult because it is impossible to say what majority shareholder Cerberus would take for its 80%. It is safe to say that, based on Ford and GM's market caps, Chrysler is not likely to go for more than $3 billion, even in pieces.

Douglas A. McIntyre is an editor at 247wallst.com.

It may seem a bit of a stretch, but Ford (NYSE: F) could benefit greatly from an Obama presidency. And it's not because Barack Obama is going to start riding in Lincoln presidential limousines like JFK and LBJ famously did.

Rather, Ford could benefit simply because politically, Obama can't afford to preside over the complete collapse of the American automotive industry. And that collapse is looking more and more like a very real possibility.

The Center for Automotive Research issued a report today analyzing the potential effects of serious cutbacks at the Big Three. If Ford, General Motors (NYSE: GM) and Chrysler were to cut production collectively by half, the result would be a loss of two and a half million jobs. If all three gave up the ghost entirely, over three million jobs would disappear in the first year alone. These are staggering figures. The impact on personal income and tax receipts would be enormous.

Unfortunately, these numbers have to be taken seriously given the state of the industry. As David Cole, the head of the Center for Automotive Research, said, "The likelihood of one or two of the Detroit Three manufacturers ending operations is very real."

There are two ways one can look at the current state of the U.S. auto industry: 1) things are pretty bad or 2) the auto sector has no where to go but up.

With cash dwindling, General Motors' and Ford's shares appear to be making a run at inclusion in the penny stock category.

Deutsche Bank (NYSE: DB) Monday did not offer research to reverse that prediction: in a research note it downgraded GM to Sell from Hold, with a target of $0 (that's correct: zero dollars), commenting that even if the company avoids a bankruptcy, it will face a bankruptcy-like future, marketwatch.com reported Monday.

A U.S. Government rescue of GM, Ford and Chrysler is likely in the early weeks of the Obama Administration, if it isn't passed by the current Congress before then, "probably on the order of $25-30 billion in loans and investments," so says economist David H. Wang, with even more assistance beyond that, if the formerly 'Big Three' automakers agree to certain performance terms. General Motors Corporation (NYSE: GM) shares plunged 96 cents to $3.40, while Ford Motor Company (NYSE: F) shares fell 8 cents to $1.94 in Monday afternoon trading.

Obama to seek next-gen vehicle

Further, Wang said President-elect Obama will likely try to solve a portion of the U.S.'s energy problem and the auto sector's woes in one program.

Will our 43rd president help the auto industry fend off the threat of bankruptcy? No. Over the weekend, General Motors Corp. (NYSE: GM) and Chrysler owner, Cerberus Capital, tried to get $10 billion of the $810 billion bank bailout bill to help finance their merger. Yesterday, Bush turned down the request. While Barack Obama supports help for the auto industry, John McCain does not. And since no reason was given for the turn down, we are free to draw our own conclusions for Bush's decision.

I think the case for not bailing out the auto industry has been severely weakened by the decision to bail out Wall Street. After all, if it's OK to give our money to the executives of big banks that got us into the financial crisis so they can pay themselves multi-million bonuses, there is no meaningful reason why everyone should not get a bailout.

I think that GM and Chrysler got themselves into their current mess by continuing to push gas guzzling, but highly profitable, minivans and SUVs rather than investing the profits in fuel efficient vehicles. And the industry has already gotten approval for $25 billion in loans to pay for fuel efficient vehicles that it should have built with profits earned during the boom years.

Not entirely forgotten, but sitting in the shadows of the potential General Motors Corp. (NYSE:GM) merger with Chrysler, is the UAW. The union has decided not to to flex its muscles on its own. It has begun to bring in help from experts. Among those the union has enlisted is a former aid to GM's management -- a nice way to get a little enemy intelligence.

According to Reuters, "Stephen Girsky, a veteran auto-industry analyst and private equity executive, is working with the United Auto Workers union with regards to any potential General Motors Corp and Chrysler LLC deal."

The UAW may be troubled by the fact that some estimates put the job loss of the merger at 60,000. Since the union seems to have fewer members every year, that is a lot of people to have leave. At some point, the UAW's bargaining power is going to move toward zero.

The UAW does not only have to help its current workers, it has to protect funds that are to be supplied by the car companies for benefits and retirement payments. It is not clear whether that capital could be threatened in a marriage of two car companies or not.

GM may not be able to get $10 billion to close the Chrysler deal, and a lot of that money would go to severance. But if a deal goes down, workers might rather keep their jobs than get a buyout which will only carry them for a few months in a recession.

GM cannot handle a strike with its U.S. sales falling 30% and its operations burning $1 billion a month. The UAW knows that. The union holds an ace.

Douglas A. McIntyre is an editor at 247wallst.com.

Chrysler has elected to suspend talks with Renault and Nissan about a three-way global auto company hook-up that would have saved the American company personnel and production costs. Chrysler will stake its future on a deal with General Motors (NYSE: GM), which means it may have no future at all.

According to The Wall Street Journal (subscription required), Chrysler's controlling shareholder, Cerberus, wants to put all of its energy into the deal it believes is most likely to close.

The decision is hard to understand. GM has indicated that it cannot finish a deal without $10 billion from the Fed to handle worker severance and costs associated with a consolidation of the two companies. It appears that the Administration has turned this down and punted it to the next president.

On paper, the GM deal makes more sense. A buyout would create one U.S. company with about 35% of the American market. A total of 30,000 or 40,000 jobs could be taken out.

What almost every analysts is asking is why Chrysler would tie its future to GM, which could run low on cash itself sometime around the middle of next year.

The answer to the question is simple. No one wants Chrysler except, possibly, GM. The number three U.S. car company is worth more in pieces than as a whole. That would give vultures an opportunity to sift through the wreckage for the best pieces and avoid taking on any of the company's liabilities or a battle with Cerberus over who owns what.

Douglas A. McIntyre is an editor at 247wallst.com.