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Comments
A structured bankruptcy is the best solution. The majority of people don't like GM, and giving GM more money would have killed Obama's approval ratings (except in Michigan).
And does anyone else feel that it is unfair that one state expects every us taxpayer to bail out these companies in order to keep that states unemployment low?
I lived and worked in international trade from the 70's onward. It was horrible for most of the 70s because our interest rates were in the 18-22% for top credit business and home mortgages. Talk about a drag on the economy.
But in the late 70s we went to our trading partners and told them that we were going to devalue the US$. It was done via the Plaza Accords. In the case of Japan the JY/$ rate went from 360 : 1 all the way down to ~ 120 : 1. BINGO!!!! Our businesses and labor and everything here was suddenly 65% cheaper. We could outsell any other developed country. As you noted it was the temporary death of imports from all our competitor trading partners. American businesses loved it with booming employment and windfall profits. We were all blessed.
But....the unintended consequences were not foreseen. Nothing goes unpunished.
If our competitor trading partners couldn't import here because of the deteriorating value of the US$.............hey why not just build here and use our cheap labor and cheap land and cheap electricity and cheap everything. Everything denominated in US$ was 65% less expensive in 1986 than in 1979.
1986???? Oh yeah that was the year that Toyota built Georgetown, KY. Honda had been in Marysville, OH a couple of years earlier. This was the beginning of the death knell for the D3 and especially for the UAW. Transplants from all over Asia and Germany sprung up all over the south simply because our costs here were far cheaper than building in the home market. These new transplants not only used less costly non-union labor but they used the latest state-of-the-art production equipment and methods. Detroit ignored the threat.
Looks more like gold flash!
2014 Malibu 2LT, 2015 Cruze 2LT,
If you take government money you give government a seat at the table. They wanted government money because they couldn't get Joe Taxpayer to give them any more by themselves. They just didn't want to give government a seat at the table. Well, if you don't want Government getting a seat at the table, then be like Ford and tell them "No thanks!" And anyone who argues that they didn't have a choice is forgetting that they have all the choice in the world about how they run their businesses. They got themselves into the messes they're in, and now the rich are asking for a "nanny state" to take care of them. That's right, the "free market" companies who have been crying for deregulation now want a nanny state. Just a different kind.
Hypocrisy = Hilarity. :shades:
D*mn straight. He better be taking control of this broken down hulk. It's got $13 Billion of our money sunk into it and from its own plans drawn up and presented to Congress there is almost no hope in the future. Not only that it needs more and more of our $$$ just to keep its head above water. The company has no value except what we put into it.
Get off the irrelevant soap box. This is a step that had to be taken. It's what the former administration should have done with AIG and the banks and then with GM & Chrysler when they came begging the first time. But no the Bushies just gave the money away with no oversight. Paulson will spend his time in Hell right next to Roger Smith ( lemko
Unfortunately yes Obama will be tied to GM's eventual fate. There's no getting around that now. But I think that there is enough bone and muscle still there for GM to revive and come back as a much smaller and more efficient company.
Actually the Feds have a fantastic record of being turnaround artists going back decades. Here's an interesting read: Washington's Turnaround Artists
Add to the article the Resolution Trust Corp.
It's likely that GM will be forced into a government-controlled bankruptcy and will end up with three major owners, the US Govt which will be pumping cash in more and more to keep it afloat, the current bondholders who will be forced to take equity in the new company in exchange for giving up 65% of their debt and also the UAW which will also be forced to take equity in the new GM in exchange for cash funding of the VEBA.
At some point in the future after the new GM emerges from BK court with prolly Chevy and Cadillac and maybe Buick/GMC it will be about half the size it was last year with a balanced structure that will not weigh down an expected sales rate of 2.0 million units annually. At that time the Feds can 'flip' its ownership for a profit via an IPO or private sale.
New roof, new siding, tear out the old worn carpets and put in new ones with new appliances and a fresh coat of paint inside, Voila!!!
Basically Obama and the auto task force drew a line in the sand and said enough is enough. He wants to save jobs, which is very important even if it is the UAW. Wagoner was incompetent and ineffective. Henderson at least is acting a bit more urgency than Wagoner ever did. he is saying all the right things as well. Obama gave GM and Chrysler a huge dose of reality telling them your companies are not viable and your plan sucks. Come up with a better plan! Isn't this what all of us have been writing about for the past 6 months?!?
Again this is about saving as many jobs as possible. 30 and 60 days is plenty of time for these companies to do what they have to do. April 30th and may 30th will be interesting days.
Regarding Michigan, they are trying to save their biggest private employers. They really have no industry to replace it. I understand where they are coming. I'm not paying attention to it but they can talk all they want. I probably would do the same thing if I were in their shoes.
Right.
If begging money so that one can run a company is the CEO's job, then we should hire the panhandler from the streets. He is the best there is :sick:
The Detroit Lions have been awful for years. Is every other team in the NFL supposed to give up their best player to make the Lions competitive? :shades:
Honda and Toyota and Ford have the most advanced Hybrids on the market, why not give them the money.
That brings up another question - if GM does file for reorganization and has the feds financing a reorg, how quick can they go into bankruptcy, cancel a bunch of contracts with the dealers and the union, renegotiate loans and come back out again?
It seems like most Chapter 11s take at least a year. GM could miss a whole model year if they can't get suppliers to deliver parts.
Scenario A... Chp 11 but it doesn't go so well and no agreements can be found so GM is liquidated in Chp 7. In that case the US Govt is one of the only secured creditors so we'd be repaid first as assets were sold off in liquidation. This is highly unlikely.
Shareholders lose everything
Bond holders break about even
UAW is out of work and the pensions are dumped on the PBGC
Scenario B.. Chp 11 on a fast track like the Government seems to want. In this case there are three main groups that will 'own' the new GM that survives.
the US Govt ( meaning us ) for all the $Billions we've pumped in. It will be much more than $13 Billion by that time.
the bondholders who now hold $27 Billion in debt but only about $10 Billion is worthwhile. They will have to swap about $17 Billion in debt for new shares in the new GM
the UAW's VEBA which is owed about $40 Billion. The plan seems to be that they take $20 Billion in cash over 10 yrs and $20 Billion in shares of the new GM
All the current shareholders lose everything.
At some time in the future after we've fixed up this 'flipper' we then put it up for sale to new owners via an IPO or via a private sale and take our profit with interest. But it might be 4 to 8 years down the road for this dump to be flipped.
This is the most likely scenario.
Just as they have "more models with 30mpg than any other manufacturer"! Of course when you rebadge everything 4 times it is easy to have more models.
GM just couldn't have aimed at a sensible business plan for hybrids. They went "too simple" and "too complex" at the same time, while Honda, Ford, and Toyota aimed at "sensible". The "light hybrid" such as the Vue and Malibu is just a stronger generator that can act like a motor and give then engine a tiny "boost". It's good for about 1mpg and lets GM call it a hybrid. Otherwise it is pretty much worthless.
The two-mode hybrid is apparently pretty good technology but very expensive. You can get it on the big SUV iron but it costs another $10K. So almost nobody as buying them because a) they're SUVs; and b) the hybrid will never earn it's investment back due to the high cost.
Then of course there's the Volt, which is an even worse case of complexity and economic disaster, for both GM and the buyer. A car that has been advertised for over two years and still has a over a year before arriving on the market. Even with tax breaks will probably cost $35K or so. Vaporware in advertising for years, at its finest.
I don't know who thought of the GM hybrid strategy, but they are idiots and should be fired (oh, right, Wagoner and Lutz). Typical of GM, they advertise a lot and then fail to deliver much. Such as V8-6-4. Such as the hot G6 winding through curves on commericals prior to its introduction. Such as the "new kind of car company", Saturn.
The great thing about the Obama GM plan is
1 - it gives urgency to GM's decisions in a way they couldn't do themselves
2 - it gives the UAW a CHANCE to save their contracts if they will make substantial concessions
3 - it puts a cap on how much/how long the US taxpayer is going to pour money into this failed company
4 - it provides a real possibility to save the best portions of GM (say, 33%) and dump the rest
5 - it dumps the CEO and most of the board
Many of us for months have been saying - dump Wagoner, the Board, strip the company down to the best vehicles, kill off most of the divisions, and void the contracts to make the company competitive and have a chance. This does exactly all those things.
That is also what is holding the Chrysler-Fiat deal up; Fiat wants to get paid back before the US government.
That being said, in bankruptcy all bets are off. If the greed of the bondholders and UAW have shown anything, they will fight tooth and nail for what they think "they deserve".
http://www.autoobserver.com/2009/04/chryslers-italian-lifeline-full-of-knots.htm- l#more
"- Sheldon Stone, a partner at Amherst Partners LLC, a Michigan-based restructuring consultant, told Bloomberg News, "It is an impossible goal. The likelihood is that the 30-day period is going to allow Chrysler to get their house in order for a bankruptcy."
Get their house in order - does that mean cash gathering and bonus payouts by the execs with the hope that the bankruptcy court won't claw the money back?
Jim Press "Clarifies" Outburst that Japanese Government Paid to Develop Prius (Wired)
You mean "loot the company?" That's probably exactly what it means. Which means my company's going to have to deal with the BK Court to get what they owe us.
With no bailout, any idea on who would buy the Jeep and Ram Steve? Any news on Canada writing a check? :lemon:
Good news is, no Chrysler means more market share for Ford and Chrysler, especially with American brand loyalist.
Canada - now there's an idea. You could park new Jeeps and Caravans in Tim Horton parking lots. Le Grand Caravan hockey edition - holds enough duffel for the entire team or the goalie, whoever gets there first.
As well as the Hockey Edition, they should make the Grizzly Bear proof Dodge Ram. Comes with bare mace and chicken wire over the windows.
http://www.freep.com/article/20090403/BUSINESS01/90403054
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2015 Kia Soul, 2021 Subaru Forester (kirstie_h), 2024 GMC Sierra 1500 (mr. kirstie_h)
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Ford is an updated Focus and car based Explorer (Explorer America maybe?)away from having a top notch line up.
As much as this publicity has turned me off GM and Chrysler, it has made me more attracted to Ford. And I'm a Honda man.
http://blogs.wsj.com/autoshow/2009/04/03/gms-pontiac-g3-headed-for-a-short-ride/-
Fear of the domino effect of a bank collapse isn't the only factor driving the different approach, though. Financial firms have much more flexible cost structures: they can shed staff and office space quickly to help restore profitability. GM's most recent restructuring plan, on the other hand, had a five-year time frame - and the writing has already been on the wall for Detroit's broken business model for at least five years.
Also, as liquidity returns, some financial asset prices should recover, meaning banks might recoup some of their losses. Chrysler and GM cannot pull that trick with car sales - in fact, they usually offer discounts to shift any excess inventory, which increases their pain."
http://money.cnn.com/2009/04/03/news/companies/breaking_views.breakingviews/inde- x.htm?postversion=2009040310
So your warranty is gov't backed - great. Where, exactly, do you get to take it for warranty service? The DMV? When given options between quite safe and somewhat unsafe, more people are likely to go for "quite safe."
MODERATOR /ADMINISTRATOR
Find me at kirstie_h@edmunds.com - or send a private message by clicking on my name.
2015 Kia Soul, 2021 Subaru Forester (kirstie_h), 2024 GMC Sierra 1500 (mr. kirstie_h)
Review your vehicle
You could even argue that a government backed warranty gives you more confidence in the car. Even if GM goes bankrupt and loses Saturn, Pontiac, Hummer, etc. the government still has to pay someone to fix you car. Money talks.
Good point.
> It also built a new reason to hate GM.
Exactly.
2014 Malibu 2LT, 2015 Cruze 2LT,
Highly unlikely. Similar to the Madoff investors.
Consider this $20B burned! Oh well! Change costs, now, doesn't it?
Regards,
OW
Regards,
OW
Regards,
OW
Yes it is indeed!
Nah, GM will wind up with the good brands in C.
Regards,
OW
Do you feel safe at your job? THAT is the 10 Trillion Dollar question. Keep giving idiot banks money.
You would think that these brilliant minds could figure out that the right course would have been to fund NEW BANKS THAT WOULD BE SOLVENT WITH OUR MONEY. Get rid of the failure banks and put them to bed. The new banks could have stimulated the economy ALREADY.
Is it just me or is the greed (read: politics) even more pronounced now??
Regards,
OW