I certainly don't want the U.S. economy to become mired down like Japan - take a look at the last 15 years in Japan
I represent Japan. Till six months ago, I would have nodded silently to the above statement, awed by the amazing prowess of the US investment banks to generate profits out thin air, as we barely made ends meet, slaving at the manufacturing lines, struggling against rising raw material costs and competition from China. We desperately wanted to copy and learn the financial wizardry (and don the suspenders / two tone shirts) but were told that this required a "different culture" that the dumb consensus minded Japanese would not understand.
So we resigned ourselves to working out of our hole the hard way. Suck in and bear with the devaluation of the currency, freezing of salaries, erosion of protection for factory labor....and yes, the mighty US economy plowed on all this time, driven by the masters of universe in Finance and Real estate.
It now seems that we were a little hasty to assume that the Armanis and Rolexes had won. In the last ten years, we have improved signficantly our competitiveness in manufacturing (OK, right now the exchange rate / export dependency may be playing tricks, but overall our manufacturing is much healthier now than it was ten years ago).
If the fuzz of Finance is removed, where is the US?
I looked into the pay scales and the Japanese pay their workers more per hour.
The last I heard, the cost of living in Japan is much higher than here in the U.S. You may have a 500 sq. ft. apartment in Japan and $10 burgers, so despite the higher wages, their lifestyle is lower in many respects.
I'm in favor of supporting our own US auto industry the way Japan and Korea support theirs with subsidies and lockout of import brands.
I am too; I just don't agree that the government should give the current owners and managers more money. Let the current owners and managers fail; and let some other American firm or investors buy the operations.
Failed transmissions on my Honda and blown engines on my Toyota are shinning examples of quality from Japan.
I wouldn't want to use the word moron (as you shouldn't do), but your car choices certainly are at conflict with your comments of support to the Big3.
Or is it $75 billion? No wait, is it even more???!!!
Aides who helped plan the meetings (between domestic automakers' CEOs and Congressional Democratic leaders) described a two-part request: An infusion of an unspecified amount of money from the Treasury or the Federal Reserve to get through, or "bridge," the current economic crisis and $25 billion in new low-interest loans to fund retiree health-care benefits.
The requests would be on top of $25 billion in low-interest loans approved in September so automakers and suppliers can retool to build vehicles that are more fuel efficient.
What a joke, to even call these loans when they will be provided to entities that are TOTALLY uncreditworthy. I think the government needs to target one of the three to keep on life support and let the other two go. That is the only way there will still be a viable domestic automaker ten years from now. All three CANNOT continue to exist, and I have my doubts that even two will manage it. So, the only question is which one to pick? (NOT Chrysler, obviously)
It's especially ironic that they are now asking taxpayers to pay their health-care benefit funds, when that was the big sparkling move they were cheered for making last year in order to "return to profitability". Heck, if it was just so taxpayers could pay for auto worker retiree healthcare, we could have done that last year and saved all the negotiators a lot of time and energy...
And this request for a tripling of the government automaker bailout came the day before Ford reported losing another $3 billion in the last 3 months alone!
Ford Motor posted a $3.0 billion after-tax operating loss in the third quarter and took further steps to cut costs in the wake of plummeting consumer confidence and tighter credit availability.
That's compared with an after-tax loss of $24 million during the the same quarter last year.
The company burned through $7.7 billion in cash during the quarter. It ended September with $18.9 billion in gross cash, down from $26.6 billion at the end of the second quarter. With available credit lines of $10.7 billion, the company said it has overall liquidity of $29.6 billion
And similarly bad news is expected from GM later today. In fact, to judge by recent sales results, GM's news will be even worse. They certainly have less liquidity than Ford.
Giving all these automakers billions of taxpayer dollars is the equivalent of flushing them down the toilet. :-(
Giving all these automakers billions of taxpayer dollars is the equivalent of flushing them down the toilet.
I agree with you wholeheartedly. I am not sure that any of the bailout bill is going to help the average US citizen. Wall Street does not seem to think it will. So kiss a large part of your 401K goodbye. If it was like mine much of the inflation was built on the subprime bubble. I think the bottom has been hit several times over the last 2 months and it rebounds. Much of that is to generate profits. I just hope my Fidelity managers are good at what they do.
When they originally put that $25 billion figure out there for the Big 3 it was to upgrade factories and build more efficient cars. Now they want to protect the retirees. Did we protect all the retirees that got screwed at Enron and the other companies that failed? Why are the autoworker retirees more important than the rest of US?
Did we protect all the retirees that got screwed at Enron and the other companies that failed? Why are the autoworker retirees more important than the rest of US?
Of course not, and auto worker retirees aren't any more important than the rest of the U.S. The thing is, the automakers have contractual obligations to the retirees' funds. If they default on that I would think a lawsuit would follow in quick order.
Bankruptcy, they HAVE to declare bankruptcy (with the possible exception of Ford, which seems to be a little better situated as far as cash position). The court will help them set their houses in order, and quite frankly these overpaid execs need an outside auditor to show them how to run their companies and maintain an even balance sheet. These companies, well GM at least, could have a bright future at half the size and number of brands they have now, but they need to right-size NOW, not 2 years from now, and they need to be released from all the constraints bad decisions in the past have placed on them.
Throwing cash at them will not lead them to this bright future, it will lead them right back to beggar status five years from now (maybe less). A complete reorganization a la Chapter 11 is what is called for.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
The treasury says that is not the way the bailout works. If we loan the automakers money under the bailout we the tax payers own a share in the companies. When and if they pull out which looks unlikely we could profit. There does not seem to be any plan except the tax payers write a big fat check and the automakers spend it on wages, retirement and health care.
In the meantime, however, the automakers have gotten little but sympathy. Congress recently voted to fund a $25 billion low-interest loan package intended to help the car companies retool their factories to produce fuel-efficient vehicles that meet tough new emissions standards. But that money has been hung up by red tape. Obama and other Democrats have discussed providing another $25 billion in loans, bringing the total federal aid to $50 billion
In their letter to Paulson, Reid and Pelosi wrote that Friday's earnings reports "only reaffirm the need for urgent action."
If the Treasury does decide to assist the auto industry, they wrote, its chief executives should be subject to the same "limits on executive compensation" as other participants in the program and should be required to give the government equity stakes in their firms "to provide taxpayers a return on their investment upon the industry's recovery."
I don't see any hope for GM without chapter 11 to get rid of several millstones around their neck.
We should use our tax dollar bailout to best benefit the tax payers. Not pay off a bunch of executives that are going to lose their mega mansions.
But we also understand why Barry D. Bernsten, the Philadelphia-based global steel wholesaler who wants to assemble electric cars in Philadelphia from Chinese bodies and U.S. batteries (PhillyDeals story here), is outraged over the prospect for federal government investments and cut-rate loans to his much bigger competitors, ailing GM, Ford and Chrysler.
"This is a hot issue for me," said Bernsten, who is seeking state aid and electric-car legislation to help fledge his own car-making enterprise, BG Automotive Group Ltd. "Every time the North American companies experience gross mismanagement, they go to the government for a bailout. I bet the average Main Street business would do just the same if they could... But only big business has the opportunity.
"There are thousands of MBAs sitting in Michigan, including the board members and executives that all decided producing $35,000 to $50,000 SUVs was the best product for the U.S. automotive industry. They were wrong! Why should the American public bail out their mismanagement?
Rewarding those that make bad decisions is not in our best interest. Somebody will build cars and it will create jobs. If we are competitive enough. Unless we have lost our desire to excel above the rest of the World. In which case we will get beat out. Seems the Electric Vehicle industry is advancing everywhere but here.
1) Setup a dedicated team to expedite any bankruptcy process, that any of the Big 3 wishes to proceed in.
2) Setup a process where any of the Big 3 operations that they will close can be auctioned off, with the buyer guaranteeing to make autos at the plant.
3) The buyer of the plants will be free and clear of any executive pay promises, union contracts, retiree promises, and supplier and dealer contracts. All of these expenses have led the Big 3 to where they are. (They have benefited for many years, so much so - that their corporations will shortly be broke. As a taxpayer with my own finances to look after, I have no desire to supplement someone else's corporate largesse.) The buyer will be allowed to setup a NEW efficient system that will be profitable.
That is IT! The government should help the quick bankruptcy, liquidation, and restart of those plants under new owners and new management systems.
with the buyer guaranteeing to make autos at the plant.
I don't think you'd be able to tie a buyer's hands like that.Or if you could, you'd just knock the price down to where I could afford to buy a factory. Couldn't afford to pay the property taxes on it, but what the hey.
How about just giving some plant operations to the employees in lieu of benefits owing?
I don't think you'd be able to tie a buyer's hands like that.
Sure the Congress could. They can make anything legal/illegal by writing a new law. And as the Patriot Act showed, if needed, the Bill of Rights can be mothballed.
Or if you could, you'd just knock the price down to where I could afford to buy a factory.
Or you and I and a thousand other Edmund's forum members might want to chip in a few thousand $ and give it a crack.
Couldn't afford to pay the property taxes on it, but what the hey.
With the $700B the banks are getting, and supposed to be loaning, we should be able get a loan. If not us, then why wouldn't Dupont come in and pickup Pontiac for $5M, GE come in and buy Chevy, Boeing buy Ford or Caterpillar buy Jeep ...
If the price is right there are many people corporations who would buy up these assets and run them.
The price is not right right now because of the obligations the Big 3 have made. No one wants them with their current obligations; but if they were removed through an outright B or other liquidation then the plants have value.
An auto plant where I don't have to buy from certain union suppliers, where I can hire and fire as I want, at market rates, and where I can distribute and sell my cars as I want - HAS VALUE.
Individually, each of us, with our 401k accounts diminishing and maybe hitting Zero, would we expect some government agency to make us whole? No! So why should a group of UAW people get relief just because they are in a herd?
Ths is EXACTLY why there should be no further bailouts! All our money disappears, we have no idea where it went or what we got for it, and at the end of the day we never get any of it back.
And if you think these crooked BANKS are bad credit risks, just look at the domestic automakers. They should be in the dictionary under "worthless credit risk".
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
I have sent letters to both my senators and my congressional representative, as well as Nancy Pelosi, urging them not to go forward with any more bailouts, including the automaker bailouts. I added a piece about the $2 trillion in fintail's linked article - will there ever be any government accountability for anything?
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
If they ever put me on a jury for the trial of a "Robin Hood", they may as well save their breathe, for I'm never going to vote "guilty". As far as I'm concerned it's open-season for the Robin Hoods on the property of these banks, their executives, and our political leaders. The Robin Hoods can wear masks and be driving moving vans off the mansion properties, and I'll see nothing.
Now getting back to the government bailing out the Big 3 - the government is telling us we'll get the $ back because it is a loan. Then why aren't the banks putting together the package? Obviously they don't think they'd get their $ back!
Here's another thought. Say if Congress doesn't directly approve any or some of the Big 3 loans or grants, because they don't want to publicly admit this biased act. What's to stop the new president or Congress to asking the Treasury to direct $75B to Bank X; with the stipulation that Bank X must "loan" $60B to the Big 3. With the little transparency and the huge amounts involved, I could see an endrun in this situation.
Instead of a direct bailout of the Big 3, Congress will pass a bill authorizing FEMA to purchase (at MSRP of course) and stockpile Big3 vehicles, for the victims of disaster. If 20K vehicles are flooded in the next hurricane, FEMA provides new cars to the owners. An earthquake in CA, no problem - all the cars will be replaced from FEMA stockpiles (maybe call it the FEMA Strategic Reserve?)
They could also use some of the large SUV's as housing, and the PU's could have a camping shell put on them.
Withdraw from the Nuclear Testing Ban treaty. The feds could hire all the unemployed housing contractors with their illegal alien work-force, and build a mock city in the desert. The feds could then buy hundreds of thousands of new Big 3 vehicles to use as cars in the city and urban highways. And then they could drop the bomb and make a study out of it. It would kind of remind me of the Bikini Atoll tests of the 50's where they use to see the effect on ships.
Then the NHTSA could go in and give "neutron star-ratings" to the vehicles.
i agree after BK, bust up the UAW, kill off half the brands and start running the US factories in the same fashion as the new big three i.e. Toyota, Honda and Nissan.
R&D will have to designate a certain amount of resources to hybrid technolgy.
I pray that the money from the feds doesn't come full circle and create another Hummer tax break loophole with the lobby in DC
The killer with taht is back in 1957 some now defunct car magazine actually did a test like that - well they put cars where they were testing a bomb and reported on teh results. The thing I remember (I heard about it decades later) was that if the car ran before teh blast it would probably run after the blast. I don't want to even know how they figured that out.
2015 Mazda 6 Grand Touring, 2014 Mazda 3 Sport Hatchback, 1999 Mazda Miata 2004 Toyota Camry LE, 1999.
And if you think these crooked BANKS are bad credit risks, just look at the domestic automakers. They should be in the dictionary under "worthless credit risk".
Well, Deutsche Bank, the crooks, valued GM at 0 today as their price target. They should at least hit that bulls eye, don't you think? THen, the Gov't bails them out and the $50B evaporates in a few months.
Here's another thought. Say if Congress doesn't directly approve any or some of the Big 3 loans or grants, because they don't want to publicly admit this biased act. What's to stop the new president or Congress to asking the Treasury to direct $75B to Bank X; with the stipulation that Bank X must "loan" $60B to the Big 3. With the little transparency and the huge amounts involved, I could see an endrun in this situation.
Then, the banks could sell the CDS for the GM loan to Iceland!
Back in the 80's my neighbors and I were having a discussion about the future of the big 3. The conversation was mainly focused on why so many boomers were buying Japanese made vehicles. One neighbor said it was just a fad. I remember telling him jingoism can only take you so far. There's a big reason why many of those boomers are still driving Japanese vehicles. More important their children now drive them as well. The big 3 had plenty of time to build vehicles that could bring back those lost customers.Sitting back and thinking "Be American Buy American" would forever drive customers to their dealerships seems to have failed. As much as I enjoy my GM vehicle....I don't think they should be rewarded for the past two decades of ineptitude.
I wouldn't want the chicks such a magnet would attract :P
We don't bail out truckers or airlines or car companies because they aren't banks. The Federal Reserve owns the American direction. Several private entities control the Fed. Think about it.
I'm one who supports BK options for the carmakers, and no bailout for bastardly bankers.
Somewhere I had a picture of Kutcher dropping off Demi's daughters at school. It was put out by one of the environmental groups she was involved with. I think he may have sold it after that. It is the other extreme from driving a Prius to show off your greenness. Though the CTX mfg would have employed more Americans than the Prius.
I don't see environmentalists as friends of American Labor.
Bet all those top executives are all pretty well off, making their salaries, bet none of the CEO's are going to declair bankruptcy...
You have just described the beauty of Corporations. There is a new law since Enron that makes the upper executives liable for any irregularities that contribute to the corporation failing. I don't think you have to worry about that with the Big 3. They have a good alibi. They build a lot of crappy vehicles and no one wants them.
"The chart above shows average hourly compensation for the Big Three ($73.20) and Toyota (TM) ($48.00), compared to average hourly compensation for Management and Professional Workers ($47.57), Manufacturing/Goods Producing ($31.59) and all workers ($28.48), data available here.
Should U.S. taxpayers really be providing billions of dollars to bailout companies (GM (GM), Ford (F) and Chrysler) that compensate their workers 52.5% more than the market (assuming Toyota wages and benefits are market), 54% more than management and professional workers, 132% more than the average manufacturing wage, and 157% more than the average compensation of all American workers?"
Why doesn't Mr. Wagoner and the Board of GM step down first, as they have brought GM to this point, and I don't have any faith they have a recovery plan that would work.
And before you go saying well it's the financial crisis, well GM was losing money before that. And like the captain of a ship, you should be prepared for a storm. And Mr. Wagoner's ship was taking on water even in the good weather, and now he's crying that he's in a storm. To me he and these other executives and Board members are nothing but a bunch of incompetent parasites, who take no responsibility. In Japan at least they know to fall on their swords.
If and I hate to see it - the feds do offer some sort of financial relief, I would like to see all the profit-sharing bonuses and stock options $ returned to the corporation (with interest) from the executives and unions, say for the last 10 years. These bonuses were further mismanagement and squander when the company was losing $ and market-share. there should have been no bonuses at all!
But back to what's the turnaround plan. Are they hoping that with oil dropping, that people start buying 17M cars again, and that they are the Big 3's larger cars and trucks? And cut some thousands of employees - which hasn't worked before, as sales keep dropping. Or do they think the new camaro and Volt are going to sell 500,000 copies each/year? What exactly is going to turn around a $10+B annual lose, and about the same at Ford and Chrysler, such that they won't lose the money given, and even more so make enough to repay the loans.
In order to repay the loans wouldn't GM have to go from $12B in loses to $5B in profits? What's that plan Mr. Wagoner? in 2009 or 2010 ... not the rosy future you're dreaming of in 2012-13.
Here's my simple plan for GM. Reduce the Board's salary to the level of their employees. Remove their decision-making powers. Sell the company to ExxonMobil for $5, give 'em a $5bn loan and let them get on with it.
You may not love XOM but it certainly is one very well run company and they don't believe in "fat".
$31.59 is about what our manufacturing employees get when you add their wages, health, and 401K benefits. If we paid $70/hour total, we'd be losing money like the Big3 also, and no bank would give us a loan because of the way we operate.
It must be nice being in a system where you expect to win financially whether you do well or screw-up royally! And then what really bothers me is the logic that 'well the government bailed these guys out wrongly, so let's just keep doing it'.
You know what the hell, let's just bailout everyone, and let the incompetent and deceitful prevail; we don't need social security, and our children will have a 50% tax rate and live a lot poorer than us. :sick:
and our children will have a 50% tax rate and live a lot poorer than us.
I think that is a given the way things are shaping up. I don't know how much money the Fed will print before they run out of ink. It looks like the Fed has loaned $2 trillion in the last few months. What ever we get as collateral is dicey the way they package these assets. The Fed says they cannot tell US who got what as that may cause a run on the bank. I feel like a mushroom these days.
GM's future may depend on Reid and Pelosi since GM will not survive past January.
November 10, 2008 - 4:40 pm ET
DETROIT -- General Motors CEO Rick Wagoner says GM's financial distress is so dire that it must line up financial assistance from Washington before President-elect Barack Obama takes office in January. Subscribe to Automotive News
"This is an issue that needs to be addressed urgently," Wagoner said during an exclusive interview today with Automotive News. Now is the time to "overshoot, not undershoot" when it comes to assistance for the auto industry, he added.
In return for financial aid, General Motors is willing to offer the government preferred stock, set limits on executive compensation and speed the introduction of fuel-efficient vehicles.
But Wagoner said he is not prepared to resign in return for government aid. "I don't think it'd be a very smart move," he said. "I think our job is to make sure we have the best management team to run GM. It's not clear to me what purpose would be served. "
Wagoner conducted his interview three days after GM posted its fifth straight quarterly loss and said it may run out of cash within a few months.
GM reported that it had burned $6.9 billion in cash during the third quarter, dropping its cash reserves to $16.2 billion. To stay in business, the company must maintain reserves of $11 billion to $14 billion.
Wagoner said the company's cash burn in the fourth quarter will ease to $1 billion a month. "We expect our fourth-quarter cash burn -- even with a very weak industry -- to be more like the first two quarters," he said.
Wagoner declined to say how much money GM needs from Washington. But he said GM's turnaround plan assumes industry sales of 11.7 million new cars and trucks next year.
"I'd say the funding request that's gone into Washington would cover us under that scenario," Wagoner said.
Without government assistance, the automaker will not survive if industry sales stay mired at 11 million units, Wagoner said. "I'd question whether the U.S. industry as a whole could survive that without support," he noted.
Even with government aid, Wagoner said, GM will have to do "significantly more restructuring" if industry sales stay this low. But if annual industry sales return to 15 million units in a few years, Wagoner said, "We'd be doing pretty good."
Sorry for posting these articles but here's one that talks about how GM can survive without a government loan.
November 11, 2008 - 11:00 am ET
NEW YORK (Reuters) - General Motors' extremely distressed debt is an attractive investment as the automaker has several options to improve its liquidity and survive the economic downturn, according to credit analysts at J.P. Morgan. Subscribe to Automotive News
GM's bonds have tumbled as the company burns through cash and struggles to turn around its business amid a weakening economy and dire sales figures. Its shares have plummeted to the lowest level since 1946.
The automaker posted a $4.2 billion loss for the third quarter on Friday and said it would cut white-collar jobs and slash next year's capital spending budget by $2.5 billion to try to cope with a sharp sales slowdown.
In spite of this bad news, J.P. Morgan analysts rate GM's bonds a "buy."
"We believe GM has several sources of liquidity it can access to bridge the company to 2010 when it realizes considerable cost cuts," analysts Eric Selle and Atiba Edwards said in a report.
These include an overfunded pension plan, possible asset sales, capital market transactions, equity injections, cost cutting and government loans, they said.
GM's benchmark 8.375 percent bond due 2033 has dropped to 25.75 cents on the dollar, from 36.5 cents at the end of October, according to MarketAxess. The bonds had traded at more than 80 cents on the dollar at the beginning of the year and currently yield 32.5 percent.
The automaker's credit default swaps are also trading at extremely distressed prices, costing 68.5 percent the sum insured as an upfront cost, plus 5 percent in annual premiums for five years, according to Markit.
That means it costs $6.85 million to insure $10 million in debt for five years, plus $500,000 annually.
"We view the upside (driven by stabilization of U.S. sales volumes and liquidity enhancement measures) on the bonds as much higher and more likely than the downside of a potential bankruptcy," J.P. Morgan said.
"GM's recent product successes (award-winning styling, performance and quality) and its considerable international profitability give us confidence they can become profitable in North America selling cars," they added.
The analysts added that they have factored in economic weakness for the next 2-1/2 years.
In addition to GM's bonds, selling protection on the debt using credit default swaps is also attractive, as is buying its term loan, J.P. Morgan said. They added, however that the company's short-term survival will require the help of the government and/or its suppliers.
Analysts at independent research firm KDP Advisors, meanwhile, said they expect GM will benefit from additional government loans and that it is likely to avoid bankruptcy.
They have a "hold" recommendation on its bonds, however, due to the risk that the company may restructure its debt, or push them further down in the capital structure, which will be harmful to bondholders.
"The Detroit automakers have, in essence, been pursuing an out-of-court restructuring over the past three years. These efforts have produced a competitive labor contract with the UAW, a viable solution to reduce retiree healthcare expense, and a substantial downsizing of capacity and headcount," analyst Kid Penniman said in a report.
"Incremental gains achieved through bankruptcy would be minimal in comparison and would likely result in an even further deterioration of enterprise values as consumers would be far less likely to purchase an expensive vehicle from a bankrupt manufacturer, with or without government guarantees," he added.
Well here's what I think of "enterprise values" and any use of public funds to enrich the owners and workers of said enterprise.
I will not purchase a product from such an enterprise, and I will actively promote that no one else buy products from such an enterprise. I have bought GM products in the past - a '94 Corsica, a '98 Camaro, an '01 Firebird Formula ..., but that will be it.
If Ford and Chrysler survive w/o these bailouts I will consider them along with the foreign makers.
I forget the numbers but seems like Tennessee gave VW about 500 million in inducements to build a plant in Chattanooga. Pennsylvania gave VW a bunch of bucks back in the 70's to build a plant and that one folded in the late 80's. Inducements and tax breaks were also given to Mercedes and Hyundai in Alabama, Nissan in Mississippi and who knows who else.
Seems like you'll be walking if you don't buy products that have a smell of corporate welfare around them.
Oh, the name of the industrial park where VW is going in Chattanooga?
Enterprise South Maybe you can email them and suggest they stick "values" in there too.
I differentiate those sorts of tax breaks because:
1) They were inducements initiated by the governments; not begging or threats from the corporations.
2) They were ventures that had a good chance of succeeding - making vehicles and money for the people for years; I don't see any viable plan that these loans will turn things around.
3) The inducements were 1-time grants; I see no end to the funds we'd need to give the Big3 annually, as they haven't made money for years.
4) I was not a member of these states that gave money to the manufacturers; it was not up to me to say don't give $ for the future reward of jobs for decades. At least the people of the state got the benefit. On the other hand - this current set of deals between the feds and the Big3 would take the entire country's $, give it to a select, small group of people to keep them working; and at wages above average (take from the poor and give to the better off?), and have no reward to the majority of taxpayers.
I remember the old Edmunds (still in a book at that point) review of that. It basically said "If you are considering the Corsica we recommend that you consider any other sedan being made instead." You don't get reviews like that anymore.
2015 Mazda 6 Grand Touring, 2014 Mazda 3 Sport Hatchback, 1999 Mazda Miata 2004 Toyota Camry LE, 1999.
Comments
I represent Japan.
Till six months ago, I would have nodded silently to the above statement, awed by the amazing prowess of the US investment banks to generate profits out thin air, as we barely made ends meet, slaving at the manufacturing lines, struggling against rising raw material costs and competition from China. We desperately wanted to copy and learn the financial wizardry (and don the suspenders / two tone shirts) but were told that this required a "different culture" that the dumb consensus minded Japanese would not understand.
So we resigned ourselves to working out of our hole the hard way. Suck in and bear with the devaluation of the currency, freezing of salaries, erosion of protection for factory labor....and yes, the mighty US economy plowed on all this time, driven by the masters of universe in Finance and Real estate.
It now seems that we were a little hasty to assume that the Armanis and Rolexes had won. In the last ten years, we have improved signficantly our competitiveness in manufacturing (OK, right now the exchange rate / export dependency may be playing tricks, but overall our manufacturing is much healthier now than it was ten years ago).
If the fuzz of Finance is removed, where is the US?
The last I heard, the cost of living in Japan is much higher than here in the U.S. You may have a 500 sq. ft. apartment in Japan and $10 burgers, so despite the higher wages, their lifestyle is lower in many respects.
I'm in favor of supporting our own US auto industry the way Japan and Korea support theirs with subsidies and lockout of import brands.
I am too; I just don't agree that the government should give the current owners and managers more money. Let the current owners and managers fail; and let some other American firm or investors buy the operations.
Failed transmissions on my Honda and blown engines on my Toyota are shinning examples of quality from Japan.
I wouldn't want to use the word moron (as you shouldn't do), but your car choices certainly are at conflict with your comments of support to the Big3.
Aides who helped plan the meetings (between domestic automakers' CEOs and Congressional Democratic leaders) described a two-part request: An infusion of an unspecified amount of money from the Treasury or the Federal Reserve to get through, or "bridge," the current economic crisis and $25 billion in new low-interest loans to fund retiree health-care benefits.
The requests would be on top of $25 billion in low-interest loans approved in September so automakers and suppliers can retool to build vehicles that are more fuel efficient.
What a joke, to even call these loans when they will be provided to entities that are TOTALLY uncreditworthy. I think the government needs to target one of the three to keep on life support and let the other two go. That is the only way there will still be a viable domestic automaker ten years from now. All three CANNOT continue to exist, and I have my doubts that even two will manage it. So, the only question is which one to pick? (NOT Chrysler, obviously)
It's especially ironic that they are now asking taxpayers to pay their health-care benefit funds, when that was the big sparkling move they were cheered for making last year in order to "return to profitability". Heck, if it was just so taxpayers could pay for auto worker retiree healthcare, we could have done that last year and saved all the negotiators a lot of time and energy...
And this request for a tripling of the government automaker bailout came the day before Ford reported losing another $3 billion in the last 3 months alone!
Ford Motor posted a $3.0 billion after-tax operating loss in the third quarter and took further steps to cut costs in the wake of plummeting consumer confidence and tighter credit availability.
That's compared with an after-tax loss of $24 million during the the same quarter last year.
The company burned through $7.7 billion in cash during the quarter. It ended September with $18.9 billion in gross cash, down from $26.6 billion at the end of the second quarter. With available credit lines of $10.7 billion, the company said it has overall liquidity of $29.6 billion
And similarly bad news is expected from GM later today. In fact, to judge by recent sales results, GM's news will be even worse. They certainly have less liquidity than Ford.
Giving all these automakers billions of taxpayer dollars is the equivalent of flushing them down the toilet. :-(
http://www.autonews.com/article/20081107/COPY/311079833/1200/ANA02&Profile=1200
http://www.autonews.com/apps/pbcs.dll/article?AID=/20081107/ANA02/811069970/1200- - -
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
I agree with you wholeheartedly. I am not sure that any of the bailout bill is going to help the average US citizen. Wall Street does not seem to think it will. So kiss a large part of your 401K goodbye. If it was like mine much of the inflation was built on the subprime bubble. I think the bottom has been hit several times over the last 2 months and it rebounds. Much of that is to generate profits. I just hope my Fidelity managers are good at what they do.
When they originally put that $25 billion figure out there for the Big 3 it was to upgrade factories and build more efficient cars. Now they want to protect the retirees. Did we protect all the retirees that got screwed at Enron and the other companies that failed? Why are the autoworker retirees more important than the rest of US?
Of course not, and auto worker retirees aren't any more important than the rest of the U.S. The thing is, the automakers have contractual obligations to the retirees' funds. If they default on that I would think a lawsuit would follow in quick order.
Bankruptcy, they HAVE to declare bankruptcy (with the possible exception of Ford, which seems to be a little better situated as far as cash position). The court will help them set their houses in order, and quite frankly these overpaid execs need an outside auditor to show them how to run their companies and maintain an even balance sheet. These companies, well GM at least, could have a bright future at half the size and number of brands they have now, but they need to right-size NOW, not 2 years from now, and they need to be released from all the constraints bad decisions in the past have placed on them.
Throwing cash at them will not lead them to this bright future, it will lead them right back to beggar status five years from now (maybe less). A complete reorganization a la Chapter 11 is what is called for.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
In the meantime, however, the automakers have gotten little but sympathy. Congress recently voted to fund a $25 billion low-interest loan package intended to help the car companies retool their factories to produce fuel-efficient vehicles that meet tough new emissions standards. But that money has been hung up by red tape. Obama and other Democrats have discussed providing another $25 billion in loans, bringing the total federal aid to $50 billion
In their letter to Paulson, Reid and Pelosi wrote that Friday's earnings reports "only reaffirm the need for urgent action."
If the Treasury does decide to assist the auto industry, they wrote, its chief executives should be subject to the same "limits on executive compensation" as other participants in the program and should be required to give the government equity stakes in their firms "to provide taxpayers a return on their investment upon the industry's recovery."
I don't see any hope for GM without chapter 11 to get rid of several millstones around their neck.
No other funding into the current auto business should be made. It needs massive change.
Regards,
OW
But we also understand why Barry D. Bernsten, the Philadelphia-based global steel wholesaler who wants to assemble electric cars in Philadelphia from Chinese bodies and U.S. batteries (PhillyDeals story here), is outraged over the prospect for federal government investments and cut-rate loans to his much bigger competitors, ailing GM, Ford and Chrysler.
"This is a hot issue for me," said Bernsten, who is seeking state aid and electric-car legislation to help fledge his own car-making enterprise, BG Automotive Group Ltd. "Every time the North American companies experience gross mismanagement, they go to the government for a bailout. I bet the average Main Street business would do just the same if they could... But only big business has the opportunity.
"There are thousands of MBAs sitting in Michigan, including the board members and executives that all decided producing $35,000 to $50,000 SUVs was the best product for the U.S. automotive industry. They were wrong! Why should the American public bail out their mismanagement?
http://www.philly.com/philly/blogs/inq-phillydeals/GM_bailout_prospect_angers_el- ectric-car_builder_Bernsten.html
Rewarding those that make bad decisions is not in our best interest. Somebody will build cars and it will create jobs. If we are competitive enough. Unless we have lost our desire to excel above the rest of the World. In which case we will get beat out. Seems the Electric Vehicle industry is advancing everywhere but here.
Regards,
OW
1) Setup a dedicated team to expedite any bankruptcy process, that any of the Big 3 wishes to proceed in.
2) Setup a process where any of the Big 3 operations that they will close can be auctioned off, with the buyer guaranteeing to make autos at the plant.
3) The buyer of the plants will be free and clear of any executive pay promises, union contracts, retiree promises, and supplier and dealer contracts. All of these expenses have led the Big 3 to where they are. (They have benefited for many years, so much so - that their corporations will shortly be broke. As a taxpayer with my own finances to look after, I have no desire to supplement someone else's corporate largesse.) The buyer will be allowed to setup a NEW efficient system that will be profitable.
That is IT! The government should help the quick bankruptcy, liquidation, and restart of those plants under new owners and new management systems.
I don't think you'd be able to tie a buyer's hands like that.Or if you could, you'd just knock the price down to where I could afford to buy a factory. Couldn't afford to pay the property taxes on it, but what the hey.
How about just giving some plant operations to the employees in lieu of benefits owing?
Sure the Congress could. They can make anything legal/illegal by writing a new law. And as the Patriot Act showed, if needed, the Bill of Rights can be mothballed.
Or if you could, you'd just knock the price down to where I could afford to buy a factory.
Or you and I and a thousand other Edmund's forum members might want to chip in a few thousand $ and give it a crack.
Couldn't afford to pay the property taxes on it, but what the hey.
With the $700B the banks are getting, and supposed to be loaning, we should be able get a loan. If not us, then why wouldn't Dupont come in and pickup Pontiac for $5M, GE come in and buy Chevy, Boeing buy Ford or Caterpillar buy Jeep ...
If the price is right there are many people corporations who would buy up these assets and run them.
The price is not right right now because of the obligations the Big 3 have made. No one wants them with their current obligations; but if they were removed through an outright B or other liquidation then the plants have value.
An auto plant where I don't have to buy from certain union suppliers, where I can hire and fire as I want, at market rates, and where I can distribute and sell my cars as I want - HAS VALUE.
This what the Fed was created for.
Well back to setting up my (whole) paycheck to go direct-deposit to the city; to pay my annual 10% increase of property tax.
And if you think these crooked BANKS are bad credit risks, just look at the domestic automakers. They should be in the dictionary under "worthless credit risk".
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
Now getting back to the government bailing out the Big 3 - the government is telling us we'll get the $ back because it is a loan. Then why aren't the banks putting together the package? Obviously they don't think they'd get their $ back!
Here's another thought. Say if Congress doesn't directly approve any or some of the Big 3 loans or grants, because they don't want to publicly admit this biased act. What's to stop the new president or Congress to asking the Treasury to direct $75B to Bank X; with the stipulation that Bank X must "loan" $60B to the Big 3. With the little transparency and the huge amounts involved, I could see an endrun in this situation.
They could also use some of the large SUV's as housing, and the PU's could have a camping shell put on them.
So no loan or bailout would be needed.
Actually, they probably couldn't do any worse than the management has done for the past 35 years.
The NEW NEW DEAL
Withdraw from the Nuclear Testing Ban treaty. The feds could hire all the unemployed housing contractors with their illegal alien work-force, and build a mock city in the desert. The feds could then buy hundreds of thousands of new Big 3 vehicles to use as cars in the city and urban highways. And then they could drop the bomb and make a study out of it. It would kind of remind me of the Bikini Atoll tests of the 50's where they use to see the effect on ships.
Then the NHTSA could go in and give "neutron star-ratings" to the vehicles.
after BK, bust up the UAW, kill off half the brands and start running the US factories in the same fashion as the new big three i.e. Toyota, Honda and Nissan.
R&D will have to designate a certain amount of resources to hybrid technolgy.
I pray that the money from the feds doesn't come full circle and create another Hummer tax break loophole with the lobby in DC
Well, Deutsche Bank, the crooks, valued GM at 0 today as their price target. They should at least hit that bulls eye, don't you think? THen, the Gov't bails them out and the $50B evaporates in a few months.
Regards,
OW
Then, the banks could sell the CDS for the GM loan to Iceland!
Regards,
OW
Better yet, sell the bundled Big 3 loans to Norway as subprime mortgages.
The average commuter car as desired by the previous 12 years of Congress...
I know you miss the political debates.
Which brings to mind. Why didn't we bail out the trucking companies and airlines that went under when fuel prices killed their business?
There's a big reason why many of those boomers are still driving Japanese vehicles. More important their children now drive them as well.
The big 3 had plenty of time to build vehicles that could bring back those lost customers.Sitting back and thinking "Be American Buy American" would forever drive customers to their dealerships seems to have failed.
As much as I enjoy my GM vehicle....I don't think they should be rewarded for the past two decades of ineptitude.
We don't bail out truckers or airlines or car companies because they aren't banks. The Federal Reserve owns the American direction. Several private entities control the Fed. Think about it.
I'm one who supports BK options for the carmakers, and no bailout for bastardly bankers.
You think the new head banker Volcker will share your sentiments? :sick: I would not look for a bailout this year unless GM files chapter 11.
You'd be sitting too high for anyone to see you.
I don't see environmentalists as friends of American Labor.
You have just described the beauty of Corporations. There is a new law since Enron that makes the upper executives liable for any irregularities that contribute to the corporation failing. I don't think you have to worry about that with the Big 3. They have a good alibi. They build a lot of crappy vehicles and no one wants them.
"The chart above shows average hourly compensation for the Big Three ($73.20) and Toyota (TM) ($48.00), compared to average hourly compensation for Management and Professional Workers ($47.57), Manufacturing/Goods Producing ($31.59) and all workers ($28.48), data available here.
Should U.S. taxpayers really be providing billions of dollars to bailout companies (GM (GM), Ford (F) and Chrysler) that compensate their workers 52.5% more than the market (assuming Toyota wages and benefits are market), 54% more than management and professional workers, 132% more than the average manufacturing wage, and 157% more than the average compensation of all American workers?"
http://www.usatoday.com/money/autos/2008-11-10-gm-shares_N.htm
And before you go saying well it's the financial crisis, well GM was losing money before that. And like the captain of a ship, you should be prepared for a storm. And Mr. Wagoner's ship was taking on water even in the good weather, and now he's crying that he's in a storm. To me he and these other executives and Board members are nothing but a bunch of incompetent parasites, who take no responsibility. In Japan at least they know to fall on their swords.
If and I hate to see it - the feds do offer some sort of financial relief, I would like to see all the profit-sharing bonuses and stock options $ returned to the corporation (with interest) from the executives and unions, say for the last 10 years. These bonuses were further mismanagement and squander when the company was losing $ and market-share. there should have been no bonuses at all!
But back to what's the turnaround plan. Are they hoping that with oil dropping, that people start buying 17M cars again, and that they are the Big 3's larger cars and trucks? And cut some thousands of employees - which hasn't worked before, as sales keep dropping. Or do they think the new camaro and Volt are going to sell 500,000 copies each/year? What exactly is going to turn around a $10+B annual lose, and about the same at Ford and Chrysler, such that they won't lose the money given, and even more so make enough to repay the loans.
In order to repay the loans wouldn't GM have to go from $12B in loses to $5B in profits? What's that plan Mr. Wagoner? in 2009 or 2010 ... not the rosy future you're dreaming of in 2012-13.
You may not love XOM but it certainly is one very well run company and they don't believe in "fat".
Same deal with Ford and Shell.
Forget Chrysler; everyone else has.
There we are............cat, pigeons, GO !
It must be nice being in a system where you expect to win financially whether you do well or screw-up royally! And then what really bothers me is the logic that 'well the government bailed these guys out wrongly, so let's just keep doing it'.
You know what the hell, let's just bailout everyone, and let the incompetent and deceitful prevail; we don't need social security, and our children will have a 50% tax rate and live a lot poorer than us. :sick:
I think that is a given the way things are shaping up. I don't know how much money the Fed will print before they run out of ink. It looks like the Fed has loaned $2 trillion in the last few months. What ever we get as collateral is dicey the way they package these assets. The Fed says they cannot tell US who got what as that may cause a run on the bank. I feel like a mushroom these days.
November 10, 2008 - 4:40 pm ET
DETROIT -- General Motors CEO Rick Wagoner says GM's financial distress is so dire that it must line up financial assistance from Washington before President-elect Barack Obama takes office in January.
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"This is an issue that needs to be addressed urgently," Wagoner said during an exclusive interview today with Automotive News. Now is the time to "overshoot, not undershoot" when it comes to assistance for the auto industry, he added.
In return for financial aid, General Motors is willing to offer the government preferred stock, set limits on executive compensation and speed the introduction of fuel-efficient vehicles.
But Wagoner said he is not prepared to resign in return for government aid. "I don't think it'd be a very smart move," he said. "I think our job is to make sure we have the best management team to run GM. It's not clear to me what purpose would be served. "
Wagoner conducted his interview three days after GM posted its fifth straight quarterly loss and said it may run out of cash within a few months.
GM reported that it had burned $6.9 billion in cash during the third quarter, dropping its cash reserves to $16.2 billion. To stay in business, the company must maintain reserves of $11 billion to $14 billion.
Wagoner said the company's cash burn in the fourth quarter will ease to $1 billion a month. "We expect our fourth-quarter cash burn -- even with a very weak industry -- to be more like the first two quarters," he said.
Wagoner declined to say how much money GM needs from Washington. But he said GM's turnaround plan assumes industry sales of 11.7 million new cars and trucks next year.
"I'd say the funding request that's gone into Washington would cover us under that scenario," Wagoner said.
Without government assistance, the automaker will not survive if industry sales stay mired at 11 million units, Wagoner said. "I'd question whether the U.S. industry as a whole could survive that without support," he noted.
Even with government aid, Wagoner said, GM will have to do "significantly more restructuring" if industry sales stay this low. But if annual industry sales return to 15 million units in a few years, Wagoner said, "We'd be doing pretty good."
November 11, 2008 - 11:00 am ET
NEW YORK (Reuters) - General Motors' extremely distressed debt is an attractive investment as the automaker has several options to improve its liquidity and survive the economic downturn, according to credit analysts at J.P. Morgan.
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GM's bonds have tumbled as the company burns through cash and struggles to turn around its business amid a weakening economy and dire sales figures. Its shares have plummeted to the lowest level since 1946.
The automaker posted a $4.2 billion loss for the third quarter on Friday and said it would cut white-collar jobs and slash next year's capital spending budget by $2.5 billion to try to cope with a sharp sales slowdown.
In spite of this bad news, J.P. Morgan analysts rate GM's bonds a "buy."
"We believe GM has several sources of liquidity it can access to bridge the company to 2010 when it realizes considerable cost cuts," analysts Eric Selle and Atiba Edwards said in a report.
These include an overfunded pension plan, possible asset sales, capital market transactions, equity injections, cost cutting and government loans, they said.
GM's benchmark 8.375 percent bond due 2033 has dropped to 25.75 cents on the dollar, from 36.5 cents at the end of October, according to MarketAxess. The bonds had traded at more than 80 cents on the dollar at the beginning of the year and currently yield 32.5 percent.
The automaker's credit default swaps are also trading at extremely distressed prices, costing 68.5 percent the sum insured as an upfront cost, plus 5 percent in annual premiums for five years, according to Markit.
That means it costs $6.85 million to insure $10 million in debt for five years, plus $500,000 annually.
"We view the upside (driven by stabilization of U.S. sales volumes and liquidity enhancement measures) on the bonds as much higher and more likely than the downside of a potential bankruptcy," J.P. Morgan said.
"GM's recent product successes (award-winning styling, performance and quality) and its considerable international profitability give us confidence they can become profitable in North America selling cars," they added.
The analysts added that they have factored in economic weakness for the next 2-1/2 years.
In addition to GM's bonds, selling protection on the debt using credit default swaps is also attractive, as is buying its term loan, J.P. Morgan said. They added, however that the company's short-term survival will require the help of the government and/or its suppliers.
Analysts at independent research firm KDP Advisors, meanwhile, said they expect GM will benefit from additional government loans and that it is likely to avoid bankruptcy.
They have a "hold" recommendation on its bonds, however, due to the risk that the company may restructure its debt, or push them further down in the capital structure, which will be harmful to bondholders.
"The Detroit automakers have, in essence, been pursuing an out-of-court restructuring over the past three years. These efforts have produced a competitive labor contract with the UAW, a viable solution to reduce retiree healthcare expense, and a substantial downsizing of capacity and headcount," analyst Kid Penniman said in a report.
"Incremental gains achieved through bankruptcy would be minimal in comparison and would likely result in an even further deterioration of enterprise values as consumers would be far less likely to purchase an expensive vehicle from a bankrupt manufacturer, with or without government guarantees," he added.
I will not purchase a product from such an enterprise, and I will actively promote that no one else buy products from such an enterprise. I have bought GM products in the past - a '94 Corsica, a '98 Camaro, an '01 Firebird Formula ..., but that will be it.
If Ford and Chrysler survive w/o these bailouts I will consider them along with the foreign makers.
Seems like you'll be walking if you don't buy products that have a smell of corporate welfare around them.
Oh, the name of the industrial park where VW is going in Chattanooga?
Enterprise South Maybe you can email them and suggest they stick "values" in there too.
1) They were inducements initiated by the governments; not begging or threats from the corporations.
2) They were ventures that had a good chance of succeeding - making vehicles and money for the people for years; I don't see any viable plan that these loans will turn things around.
3) The inducements were 1-time grants; I see no end to the funds we'd need to give the Big3 annually, as they haven't made money for years.
4) I was not a member of these states that gave money to the manufacturers; it was not up to me to say don't give $ for the future reward of jobs for decades. At least the people of the state got the benefit. On the other hand - this current set of deals between the feds and the Big3 would take the entire country's $, give it to a select, small group of people to keep them working; and at wages above average (take from the poor and give to the better off?), and have no reward to the majority of taxpayers.
I remember the old Edmunds (still in a book at that point) review of that. It basically said "If you are considering the Corsica we recommend that you consider any other sedan being made instead." You don't get reviews like that anymore.