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Do You Favor A Government Loan To The Detroit 3?
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BUENOS AIRES, Dec 6 (Reuters) - Argentine automakers will sell basic models at cost through state-subsidized loans in a plan to protect jobs in Latin America's third-biggest economy from the global economic slowdown, government officials said on Saturday.
Local plants of Renault SA (RENA.PA: Quote, Profile, Research, Stock Buzz), General Motors (GM.N: Quote, Profile, Research, Stock Buzz), Peugeot (PEUP.PA: Quote, Profile, Research, Stock Buzz), Ford Motor Co. (F.N: Quote, Profile, Research, Stock Buzz) and other automakers will participate in the government's plan to protect 150,000 auto industry jobs and to keep production from falling steeply next year.
"We have agreed with the plants that these cars will be offered without a profit margin and the dealerships will also reduce their profit margin," Industry Secretary Fernando Fraguio told a news conference on Saturday.
The $890 million government auto loans program is part of a $3.8 billion economic stimulus package announced on Thursday by President Cristina Fernandez.
Each automaker will offer two of its most economic models for the plan, while the government will provide three different financing packages with interest rates much lower than market rates, to be funded by the social security system.
http://www.reuters.com/article/rbssConsumerGoodsAndRetailNews/idUSN0632016920081- 206
The Big Three executives spent two consecutive days on Capitol Hill this past week pleading for as much as $34 billion in loans to help their industry survive. But they made clear that $15 billion would be enough to keep them running until the end of March 2009. GM has indicated it needs about $10 billion to last that long, while Chrysler chief executive Bob Nardelli said his company would need $4 billion. Ford's chief executive, Alan Mulally, said Ford did not anticipate needing any federal cash during that period.
3 Months = $14B
Regards,
OW
Unfortunately there likely isn't enough current US plant capacity at Ford and the transplants to meet all of the lost GM volume. So it will take imports and they won't be using those US vendors.
Well, one of them just might! If GM dies, I'll probably have a massive stroke or heart attack!!! :sick:
Why? Hasn't it occurred to you that Cadillac might do better without the bloated GM corporate albatross around its neck?
1 - GM spins off only Cadillac into a smaller company.
2 - GM spins off a Chevy company with only the best non-Cadillac cars and trucks
3. The remaining GM company has lousy vehicles and huge debt. It declares bankruptcy and goes into Chapter 7/liquidation.
The result: a competitive Cadillac company and a competitive Chevy company, neither with any debt.
That is absolutely FALSE. We will sell 6,000,000 less cars this year and probably the next couple years. GM did not make 6 Million cars. If anything a GM total liquidation would boost Ford into a very good money making position. It would also help the imports that do indeed buy parts from the same suppliers as GM. It might be what Delphi needs to pull out of the doldrums and C11. More people filed for first time Unemployment this week than the total GM workforce in the USA.
You also forget the most important advantage to a GM liquidation. There are people with money that would love to take over some of the GM nameplates and continue to build those cars. They may even use UAW labor if they can get contracts that don't bury them before they start. Kerkorian one of the big stockholders at one time is probably still interested. No one in their right mind would buy them in their current condition.
That is not a bad idea if the UAW contracts in their 2200 pages would not put a monkey wrench in the works. And would the retirees from Chevy & Caddy have a hold on the company? Some plan like that where a new owner comes in and starts hacking all the dead weight from the company. You know like Congressman Dingell's wife that is a high ranking GM executive.
Yes, I don't know if the contracts would pass along or if they could be "GM-only" contracts. Then if GM bellies up the pension guarantee corp of the government takes over.
The current GM shareholders would get new shares of Caddy, new shares of Chevy, and remaining GM's value would drop to zero. The remaining factories and assets of the remaining GM corp sold off to pay as much of the $66B in debt as possible. The new Caddy and Chevy companies would not have the GM name any longer, which would be a good thing. Then with new leadership in both of those companies, they could rise from the ashes and really kick butt.
You are the one predicting the demise of America. Being weak-kneed in the face of adversity is not the American way. Just suck it up and get going. Doom and Gloom is for losers and laggards.
First, Ford and Toyota have all the truck capacity the country will need even if GM and Chrysler went under. Ford especially would be a HUGE beneficiary of this since it was making nearly 1 million units as recent as 3 yrs ago but now is likely to be making half that amount.
Second and this is why GM will not disappear completely. GM has plenty of good products and capabilities and production facilities. If it did go BK they wouldn't just lock the doors and tear down the facilities. The BK court likely would liquidate the company but that means selling off the excellent assets to other companies or to new owners, such as Ford for example or very likely the Chinese ( Lemko's hair starts on fire ). Those facilities and most of the jobs remain in place still making Ford Silverados and Malibus, Chinese Cadillacs, German Corvettes, etc. Rich Wagoner might even buy some of these back distressed assets so that he could run another company into the ground.
I can see Chrysler disappearing completely and it's production facilities closing and the country will not miss the shortfall in supply. GM and Ford wil pick it up instantly and use some of their excess currently non-functional supply.
Bottom line, what Detroit’s really after is a bailout that will preserve the status quo and implicitly reward 40 years of inept management, bad decisions and poor quality. It simply doesn’t make sense to throw $34 billion at businesses that are losing $6 billion a month.
Like the other Federal bailouts (which I, as a proponent of the Austrian school of economics and free markets, think are fundamentally wrong), a taxpayer-funded bailout would do nothing to increase Detroit’s competitive position. Instead, a funded bailout would serve as a sort of punitive tax on successful companies like Toyota and Honda, just to name two of the most obvious. It would also allow Detroit to come back for more money after they blow through anything given to them now.
There are still plenty of strong automobile companies operating in the U.S. making a slew of products ranging from ultra-plain utilitarian models to large-scale trucks and all sorts of luxury vehicles in between. And more will probably come here if they fail.
So here’s to the natural order of things and, hopefully, a levelheaded Congress that will let the markets take their natural course and force a shakeout not a bailout.
Here is the rst of the economics lesson. I still vote no bailout. Better to give the money to support best in class companies!!!!!
40 Years
Regards,
OW
http://online.wsj.com/article/SB122852320928184421.html?mod=djemEditorialPage
You got your "Greens" in DC just drooling over the opportunity to own a car maker they can mold into an alternative transportation company. Cost is not even considered by this bunch. They will try to force US all into a Yugo that is powered by the Sun with peddles to assist on the long up hill roads.
Fortunately we have a Congress that rarely agrees on anything, but when it is lunch time. The buildings at GM will be all rusted out before they can come up with a bailout plan. We will give them a few billion so everyone gets a nice Christmas. Then it will be on the shoulders of the new team to get the job done. I would be looking for a new job if I worked for GM or Chrysler.
The UAW workers at Ford may survive if they back off on blocking progress. For those that did not see it. This IS progress, and it could have been built in the USA, but for the UAW.
http://info.detnews.com/video/index.cfm?id=1189
I say we need to bail them out but then make sure it never happens again.
So I guess you never expect much out of a new president and Congress right? for they have the whole country to change and only 4 years? And Wagoner has had a single corporation and 14 years.
Ironic that the one who arguably had nothing to do with this mess is the one who can clearly see the problem...another reason why I believe that Ford will be the last man standing.
DETROIT, Dec 7 (Reuters) - With sport-utility vehicles at the altar and auto workers in the pews, one of Detroit's largest churches on Sunday offered up prayers for Congress to bail out the struggling auto industry.
"We have never seen as midnight an hour as we face this week," the Rev. Charles Ellis told several thousand congregants at a rousing service at Detroit's Greater Grace Temple. "This week, lives are hanging above an abyss of uncertainty as both houses of Congress decide whether to extend a helping hand."
Local car dealerships donated three hybrid SUVs to be displayed during the service, one from each of the Big Three. A Ford Escape, Chevy Tahoe from GM and a Chrysler Aspen were parked just in front of the choir and behind the pulpit.
Ellis said he and other Detroit ministers would pray and fast until Congress voted on a bailout for Detroit's embattled automakers. He urged his congregation to do the same.
Other Detroit-area religious leaders -- including Christian, Muslim and Jewish leaders convened by Cardinal Adam Maida -- have urged Congress to approve an auto aid package.
But the service dedicated to saving Motown's signature industry at Greater Grace Temple was the highest profile effort to mobilize support yet.
http://www.marketwatch.com/news/story/Tribune-could-file-bankruptcy-WSJ/story.as- px?guid=%7B71F8BA18%2D2283%2D4844%2D8818%2D6269BB00CF08%7D
Or Dow Chemical this morning announced an 11% cut in employment and 20 plants closing. I guess they don't have any lobbyists? Maybe when Dupont and Exxon Mobil cut they can all go for a bailout too?
Oh, I can't forget the homebuilders. Let's bail them out too. And I hear income in Vegas is down; we can't let that area which is already suffering large home price decreases to suffer more. How about bailing out all of Nevada?
Congress could set tough bailout conditions. Here are some possibilities.
•Appoint a "car czar" to oversee automakers' restructuring
•Force companies to file for bankruptcy if they don't meet loan terms
•Require GM and Chrysler to merge
•Cut hourly workers' compensation and scrap the UAW Jobs Bank
•Compel bondholders to accept a debt-for-equity swap
•Prevent companies from lobbying against states' global warming initiatives
Nothing about dealer franchises, at least not that I can see. If they force GM and Chrysler to merge, they will have 11 brands and what, 10,000 dealers? How will they rid themselves of the 7000 dealers and 7-8 brands they need to? Will the "car czar" have a hand in that, and the ability to suspend existing laws in this area so that the necessary cuts can be made?
http://www.autonews.com/article/20081208/ANA03/812080320/1200
(registration link)
PS there is also this: Some lawmakers floated the idea of requiring financial institutions that are getting federal aid from the $700 billion rescue package to make loans to automakers.
While that sounds intuitively tempting, I think it would be a bad idea - we only just got done rescuing them from bad debts, now we want to saddle them with new ones?
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
http://www.autonews.com/article/20081208/ANA02/312089881/1018
I'm not an economist nor an expert in the auto industry but the numbers just don't add up for GM. They are $66B in debt; their common stock is worth less than $5B; they have made a profit since 2004 when sales were over 16m; there is no way they will show a profit with current sales and structure; too many dealerships that will require billions to close; etc. I'm in favor of a pre-packaged bankruptcy so we can save some jobs and get GM to profitability.
DETROIT — Saturn's franchise agreement is different from those of General Motors' other brands.
The Saturn agreement required dealers to sign the Federal Trade Commission's Franchise Disclosure document, says Mark Johnson, president of financial advisory and brokerage firm MD Johnson near Seattle.
Subscribe to Automotive News
"Nobody at any car store since the beginning of time has ever signed one of those except Saturn dealers," Johnson says. "The whole document tells you how you could potentially lose all of your investment through debt and losses through this franchise."
Saturn confirms the unique agreement.
Saturn spokesman Steve Janisse says, "Everything was done differently with Saturn, and this was one of those things."
Janisse says Saturn has a different legal structure from other GM brands. Saturn has a Franchise Operations Team, which has a limited say in brand operations.
The FTC document favors the manufacturer, Johnson says, "so GM is in a much better position to terminate Saturn than any other manufacturer with any other brand."
In the late 1980s, GM cherry-picked the best dealers for the new dealer network. The dealers have heavily influenced the company.
Janisse says GM's seven other brands operate under a Dealer Sales and Service Agreement, a personal service agreement between the dealer and GM. For dealers, Johnson says, the good news is that state franchise laws probably would trump any signed documents in a court of law.
I think it is too late for GM to do any good for Chrysler or the other way around. Sell Jeep to Ford and let the rest be liquidated. Doesn't Ford own Cummins diesel? They could get rid of that PowerStroke junk and start using the Cummins in their trucks.
Trying to rid themselves of dealers is too costly. Let GM just go into bankruptcy and the dealers will fall on their own. Most are ready to kick the bucket right now. Let Ford survive as a much stronger AMERICAN automaker. The Big 3 are pathetic and no amount of bailout is going to save all 3. We need to get it over with and done. Then the rebuilding can begin. Next year will be just slow bleeding if we try to keep all three going.
While that sounds intuitively tempting, I think it would be a bad idea - we only just got done rescuing them from bad debts, now we want to saddle them with new ones?
The automakers are the ultimate subprime borrowers.
nippononly, "What if GM Dumps Saturn?" #21, 8 Dec 2008 8:25 am
None of them do, that's the way GM works. it's primarily Chevy and a bunch of Chevy clones. Hummer consists entirely of Colorado and Silverado platforms, Saturn, Pontiac, Saab, Buick, even Cadillac, they're all using the same platform. GM can sell names, but not business units. All they can do is close them down.
Allot of people here talk about one auto maker buying another auto makers platform. Isn't to many products one of the things that has us in a mess now? I want to see Ford do away with the whole LM deal all together and concentrate on Ford.
Though I must admit that CTS is one sweet looking ride
What does Ford have to compete with the Wrangler? By the way the Bronco II was a horrible POS. Unsafe at any speed. And not worth a hoot off road. Ford has never had a decent off road vehicle. Including the early Broncos. I loved my 84 Bronco. Yet it was not in a league with the Wrangler. The rest of Jeep line, Ford has covered fine.
Then again it may be too much of a hassle with Daimler still having a chunk. Maybe best to just let them liquidate with GM and get it over with. I am not a big Ford fan. But I think they have won the battle of the Big 3.
I was on a couple Tierra del Sol runs with a few late 1960s Broncos. They broke down a lot. They could not match up to Jeep or even my cheapo 1964 Toyota Land Cruiser. IH Scouts were the worst of the bunch. My neighbor has a 1970 Bronco he uses as his everyday driver. Just not off road.
"GM vehicle death list is complicated"
...But determining which vehicles will go isn't as simple as finding eight sales duds in GM's lineups. GM will kill more than eight vehicles -- while adding several others -- by 2012.
--- And in related news, Toyota, GM's arch-rival has announced it will match GM's spending and cost cuts by cutting it's own critical items such as double-ply toilet paper for the bathrooms (instead going to single-ply), and switching over coffee brands from DunkinDonuts to Maxwell House. Discontinued use of Poland Springs water coolers is under investigation as well... :lemon:
I don't think they could make anything about their business more complicated.
The Jeep name along with the Wrangler
The Ram business but it's shrinking along with all other trucks
The minvans but those are shrinking also
It also has some rights via Daimler to the 2-Mode hybrid system but nothing of interest to put into use.
Luckily for future buyers ( and this is actually part of Chrysler's problem ) none of these are compatible. The Wrangler underpinings are different than the Ram which is entirely different from the minivans.
Mahindra Jeeps?
Chinese Minivans?
Renault-Nissan Rams?
None of them do, that's the way GM works
GM was really stupid here - it used to be that all the small Saturns were built at Spring Hill, TN, the dedicated Saturn plant. THAT would have been an asset they could have sold now if they had continued that arrangement, but these days Spring Hill makes something else, and I guess some the Astras come from Europe?
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
How long would you & I & everyone I know that works for a living last with this kind of dismal performance?
Regards,
OW
Oh, so they're going to start using that same 50-grit sandpaper that we gov't contractors have had to put up with since the dawn of time. :P
What is funny is I remember the Operators at RCA Alascom filing a grievance over TOO COURSE TOILET PAPER. And the company got samples and started buying the one the girls voted for.
RCA sold out before they needed to be bailed out.
I don't think Congress is real happy giving money to a losing cause like the automakers.
At the Capitol, Senate Majority Leader Harry Reid, D-Nev., said, "While we take no satisfaction in loaning taxpayer money to these companies, we know it must be done." He added, "This is no blank check or blind hope."
Automakers' Bankruptcy Would Cost Taxpayers Four Times More Than Bailout, Study Finds (AutoObserver)
Kernick notes on the GM News discussion that Anderson, the study author, is based in Michigan and their largest clients are the Big 3.
Many taxpayers would say, "While we take no satisfaction in giving taxpayer money to these Congressmen, we know it must be done."
Too bad we can't add in order to limit Congress, "This is no blank check or blind hope."
2014 Malibu 2LT, 2015 Cruze 2LT,
It just looks to me like the guy losing his job at a dealership in CA or NY will not get any benefit from a bailout. In essence the bailout is supposed to kill off more jobs at the periphery of the auto kingdom. And the money will all go to the core group in Detroit. The very people that caused the demise of the US auto industry to start with.
They have a short position paper out on the subject:
"Collapse or partial collapse would have a significant ripple effect"...
pdf file
What's also not considered in these studies is where is the US in say, 5 years in either case? Still bailing out the D3/2/1 every year with tax dollars, or sprouting new businesses in the ashes of the old industries.
OK. It's a fantasy. But if I had five minutes in front of Congress last week, here's what I would've said:
Good morning. First of all, before you ask, I flew commercial. Northwest Airlines. Had a bag of peanuts for breakfast. Of course, that's Northwest, which just merged with Delta, a merger you, our government, approved -- and one which, inevitably, will lead to big bonuses for their executives and higher costs for us. You seem to be okay with that kind of business.
Which makes me wonder why you're so against our kind of business? The kind we do in Detroit. The kind that gets your fingernails dirty. The kind where people use hammers and drills, not keystrokes. The kind where you get paid for making something, not moving money around a board and skimming a percentage.
You've already given hundreds of billions to banking and finance companies -- and hardly demanded anything. Yet you balk at the very idea of giving $25 billion to the Detroit Three.
Heck, you shoveled that exact amount to Citigroup -- $25 billion -- just weeks ago, and that place is about to crumble anyhow.
Does the word "hypocrisy" ring a bell?
Protecting the home turf?
Sen. Shelby. Yes. You. From Alabama. You've been awfully vocal. You called the Detroit Three's leaders "failures." You said loans to them would be "wasted money." You said they should go bankrupt and "let the market work."
Why weren't you equally vocal when your state handed out hundreds of millions in tax breaks to Mercedes-Benz, Hyundai, Honda and others to open plants there?
Why not "let the market work"? Or is it better for Alabama if the Detroit Three fold so that the foreign companies -- in your state -- can produce more? Way to think of the nation first, senator.
And you, Sen. Kyl of Arizona. You told reporters: "There's no reason to throw money at a problem that's not going to get solved." That's funny, coming from such an avid supporter of the Iraq war. You've been gung ho on that for years. So how could you just sit there when, according to the New York Times,
an Iraqi former 20 chief investigator told Congress that $13 billion in U.S. reconstruction funds "had been lost to fraud, embezzlement, theft and waste" by the Iraqi government?
That's 13 billion, senator. More than half of what the auto industry is asking for. Thirteen billion? Gone? Wasted?
Where was your "throwing money at a problem that's not going to get solved" speech then?
Watching over the bankers?
And the rest of you lawmakers. The ones who insist the auto companies show you a plan before you help them. You've already handed over $150 billion of our tax money to AIG.
How come you never demanded a plan from it? How come when AIG blew through its first $85 billion, you quickly gave it more? The car companies may be losing money, but they can
explain it: They're paying workers too much and selling cars for too little.
AIG lost hundred of billions in credit default swaps -- which no one can explain and which make nothing, produce nothing, employ no one and are essentially bets on failure. And you don't demand a paragraph from it?
Look. Nobody is saying the auto business is healthy. Its unions need to adjust more. Its models and dealerships need to shrink. Its top executives have to downsize their own importance.
But this is a business that has been around for more than a century. And some of its problems are because of that, because people get used to certain wages, manufacturers get used to certain business models. It's easy to point to foreign carmakers with tax breaks, no union costs and a cleaner slate -- not to mention help from their home cou ntries -- and say "be more like them." But if you let us die, you let our national spine collapse. America can't be a country of lawyers and financial analysts. We have to manufacture. We need that infrastructure. We need those jobs. We need that security. Have you forgotten who built equipment during the world wars? Besides, let's be honest. When it comes to blowing budgets, being grossly inefficient and wallowing in debt, who's better than Congress? So who are you to lecture anyone on how to run a business? Ask fair questions. Demand accountability. But knock it off with the holier than thou crap, OK? You got us into this mess with greed, a bad Fed policy and too little regulation. Don't kick our tires
to make yourselves look better.
Thank you
Mitch
Jaws dropped as Zandi, under questioning by Committee Vice Chairman Richard Shelby (R-Ala.), expressed his belief that it would take between $75 billion and $125 billion -- nearly 1 percent of the entire nation’s gross domestic product -- to keep the Big Three out of bankruptcy. But no one disputed the assertion, nor did they seriously dispute Zandi’s prediction that a $34 billion would only clear the way for the automaker to return asking for more.
Cost to Resist Bankruptcy
Perhaps 62vette's barber was correct at $500B!!
Regards,
OW
2014 Malibu 2LT, 2015 Cruze 2LT,
So the rationale is: look at all the money we have already wasted. What's some more?
That's twice for me today - ROTFLMAO!!!!!! :-P
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)