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There was NEVER a chance of a complete failure of the auto industry. Ford, Toyota, Nissan, Honda were doing fine. The suppliers for GM and C were also supplying the rest. And as the AA article mentions, chapter 11 bankruptcy is a common way to shed unwanted costs. AHA, there is the Real issue. The UAW was a burden to GM & C along with Ford. In a real legal bankruptcy they would see some give and take like the rest. In the Obamanation bankruptcy, everyone took a cleaning except the UAW. It could have been done legally without any catastrophic consequences. The result will be reluctance to invest in American companies. And we are seeing that play out with more and more companies investing over seas.
Indiana's State Police Fund and Major Moves Construction Fund, which finances roads and bridges, together lost more than $1 million. And the Teacher's Retirement Fund "suffered, at a minimum, a loss of $4.6 million due to the action of the Federal government," reports Mr. Mourdock.
Far from being speculators, these funds represent retired public employees, including cops and teachers. The funds paid a premium to buy "secured" status, only to discover that they were politically outranked by the United Auto Workers in the White House hierarchy.
"In the past, to be 'secured' meant an investor was 'first in line' in the event of a bankruptcy and 'non-secured' creditors would receive value after secured-creditors were paid," Mr. Mourdock says. "In the Chrysler bankruptcy, however, secured creditors received $.29 on the dollar even as non-secured creditors received higher values and ended up with a 55% ownership of the new company, which is fundamentally wrong and a dangerous precedent to the capital markets."
http://www.wsj.com/articles/SB124286497706641485
(Don't forget that Ford went to DC to garner support for GM and Chrysler too. If Ford was doing "fine" we wouldn't have been able to pick up some of their stock for $5 a share).
Everyone was hurting, I got my "F" at $1.76 per share. The issue was the 5th amendment protected bonds. Most of the bond holders were the big Banksters. They got bailed out with TARP and did not scream at the injustice. As usual in our system of justice the little guys got the shaft. The small investors that got hurt bad with their supposed safe investment. Similar to what 3rd World countries do. Like when Mexico went to the New Peso and reduced 1000 pesos to one Nuevo Peso. Which at the time matched the US dollar. Now what are they about 13 Nuevo Pesos to the US dollar. The whole bankruptcy was Political. If you were part of the UAW IN CROWD you came out doing well. If you worked for one of the OTHER Companies like Delphi, you got the royal shafting. Ironic part the UAW has already dumped their share of Chrysler and will likely lose jobs if they get stupid and strike for a bigger share.
I think Joseph Schumpeter (sp?) called it "creative destruction"...just like Henry Ford did to the makers of buggy whips and horse draw carriages, just like Android and Apple did to Blackberry...there is nothing sacred about autoworkers, and they would have found jobs with other automakers, although they may have to move to get them...all those transplant factories, plus whoever bought out GM's assets...all Obama did was protect his Democrat union buddies and violate US bankruptcy law...he should be impeached, but that is something for another topic...:):):)
Sure, Ford might have recovered to be a small player. The auto industry is BOOMING right now--how could it be any better?
Yes, yes, the bankruptcy was messy but when the house is burning down, you don't politely ask where the door is.
Well we don't really know, do we?
The problem with these sorts of things is that unlike say a clinical trial study on a drug, you can't run the experiment both ways. You take a guess and run it one way, and then there is endless speculation about what would have happened - but we can never know.
On the one hand the auto industry is doing great - sure, the economy is pretty good right now (not to mention the pent up demand). But the other way - could have been a total collapse, or could have been better than now.
We might not have legacy dealership organizations trying to stifle sales of the most advanced electric car in the world - designed and made in USA - if they had been disbanded. We might not have the drag of union pensions on the price of new US car stickers - lowering the price and improving competitiveness of US makes. We might have had other companies step into the business - with new ideas and innovations. We will never know.
Ford was actually in favor of the bailout and as you may recall, went to Congress right along with GM and C to support a bailout. Ford knew quite well that Romney's suggestion of letting the two companies fall into a "structured bankruptcy" and become smaller and more efficient companies in time wouldn't work because both companies would have needed considerable cash to operate while restructering. So a restructure with big loan money was impossible, and total collapse was the only alternative to a bailout.
Said Mulally: "This could be upwards of 13% of the U.S. GDP if they (GM and Chrysler) were to go into freefall," Mulally said. "We believed [seeking the bailout] was the right thing for the industry, the right thing for the United States of America.... I'd do the same thing today."
The only difference with Ford is that they borrowed their money privately.
If you believe that bit of creative spin. I have read figures up to $15 billion loss on GM. Plus the Billions dumped into their R&D on the Volt and other projects. The biggest loss to the tax payers was the $27-$29 Billion handed to the UAW Pension plan in both cash and stock. With $800 Billion in TARP being handed out willy nilly and anotehr $800 Billion in Stimulus, how would anyone ever find the truth? We know a lot of people got rich, from those two government giveaways. Not me and probably not you.
"What would you LIKE that number to be?..."
Shifty, that's definitely what the system has become. And those receiving privatized profits will cry about socialism.
But later on Monday, Automotive News reported that a Lear senior vice-president of human resources, Tom DiDonato, said that in order to eliminate the two-tier system for about 450 workers, the UAW agreed to accept a new job title for 310 positions—sub-assembly workers—with even lower wages. At the end of the contract, starting pay for subassembly workers would be $12 an hour (compared to $16.50 for assembly workers) and the maximum would be $15.25 (below the top pay of $16 an hour in the previous contract for assembly workers).
Luna continued to insist that two-tier wages had been eliminated, Automotive News reported. He said that workers’ support for the contract was “overwhelming” but refused to give the precise vote count.
http://inthesetimes.com/working/entry/17196/did_indiana_autoworkers_strike_a_blow_against_two_tier_contracts
What a concept.
Let's see, thanks to RTW, the unions are forced once again to justify their existence since they are no longer "guaranteed" a membership, so they get back to work and earn their keep. They'll fight tooth and nail for better wages and working conditions and businesses will wind up paying more and the Dems get more phone bank workers. Talk about unintended consequences.
Bottom line, the states with RTW laws are getting the new factories. In CA it would not make any difference. The Trade Unions are about all history. Immigrant contractors don't need no stinking Unions.
Some of not needing unions is a willingness to race to the bottom - take a look at the employees of some of those contractors, not to mention legal debates. The pendulum will probably swing back at some time, as we enter a new belle epoque.
Public employee Unions of EVERY kind give all unions a bad name. Most people would not know the difference between public and private union. All they see are cops, firemen and teachers knocking down packages that are over $100k per year, while they are struggling to keep up with their bills. It is especially bad in CA where we pay professors $243k per year to teach one stinking class a week. And have close to 20,000 retired public servants knocking down over $100k per year. Public servants and their corrupt unions are bankrupting our cities and states. Protecting incompetent cops is a small part of the problem.
But as others have said, we'll never really know, though most sources point to a 15-20 billion dollar loss on the experiment, not 2 billion.
Kind of like Toyota and Honda, both of whom employee lots of US workers. As do GM and Ford in other countries.
Toyota and Honda also never sold Neons
It would be nice if I only had to pay back 20% of my mortgage, and then say I paid it all back...
Sure is nice to live in a progressive Western state where we only give incentives to spaceports.
Chrysler repaid $9.2 billion. Fiat already owned 35% of the company and they took the 15% owned by the government with the Treasury absorbing a $1.3 billion loss. Fiat had to commit to building an engine plant in the US as well.
According to the Center for Automotive Research, the bailout saved 1.2 million jobs and $34.9 billion in tax revenue.
The retirees contend that the Obama administration “picked winners and losers” as it helped guide GM through its own 2009 stint in bankruptcy protection. They charge that the administration helped ensure that union pensions were bolstered or “topped off,” while salaried pensions were ignored. Topping off hourly pensions was never a legal obligation for GM while it was going through bankruptcy, they argue.
“The truth is beginning to emerge,” said Tom Rose, a Washington Twp. resident who worked for GM and Delphi for 39 years.
http://www.daytondailynews.com/news/business/delphi-retirees-cheer-federal-ruling/ngkgT/
I would love to see which companies have paid anywhere near that amount. I don't think GM has paid a penny so far. The GM bailout just keeps giving to them for years to come.
DETROIT, May 4 (UPI) -- A spokesman for U.S. automaker General Motors said the company paid no federal income tax for 2011 despite earnings of $13 billion since 2009.
The Detroit News reported Friday GM earned profits of $1 billion in January through March but may not have a federal tax bill to pay "for many more years."
The tax-free years are the result of GM's stint in bankruptcy in 2009.
The newspaper reported the Treasury Department gave GM permission to use the $18 billion in losses from the pre-bankruptcy company, the so-called old GM, to cancel out any profits it has made since it emerged from bankruptcy.
http://www.upi.com/Business_News/2012/05/04/GMs-federal-income-tax-bill-Zilch/97811336160538/
General Motors Co. will drive away from its U.S.-government-financed restructuring with a final gift in its trunk: a tax break that could be worth as much as $45 billion.
Now it turns out, according to documents filed with federal regulators, the revamping left the car maker with another boost as it prepares to return to the stock market. It won't have to pay $45.4 billion in taxes on future profits.
http://www.wsj.com/articles/SB10001424052748704462704575590642149103202
For the full bailout, it was from the feds, not for local economic stimulation, and the business models of these companies had failed. That's a big difference if you believe in survival of the fittest.
And the failure part - GM and Chrysler had the real estate, the tooling, the dealer network and the trained employees. They could hit the ground running. Much of the economic development tax breaks are for existing companies to expand (through additional infracstructure or "free" commnunity college classes), but many others are risky endeavours that don't fly. Even in those sucessful cases, you are often talking years to see any results.
Goodyear
TRV
Lear
Johnson Controls
Dana
Cummings
DuPont
and thousands of tier 2 suppliers that make things like clamps, hoses, misc plastic parts as well tens of thousands of support companies such as MSFT, local IT companies, the office supply company, the coffee service, et al.
I understood that, just don't believe it. Of course if they are saying over a ten year period it may be so. When a number like $34.9 billion is tossed out without a time frame, I expect it is for one year. We will never know if it was good for the auto industry and the USA. By some standards the US is doing great. Just not if you are in the bottom half of society. Or in a part of the country the largesse was not aimed at. Those 4500 UAW folks in CA at the GM/Toyota factory, are likely homeless by now. To me all TARP and the Stimulus did is make the banksters on wallstreet very rich and the dollars in my pocket worth less. Then I am in the 100 million plus on a fixed income with no COL. Anyone that believes the bailout was anything but a UAW payback for support of the Democrats, is not paying attention.
Tension in Tennessee:
"Top Volkswagen officials came under harsh questioning Tuesday from a Chattanooga Republican lawmaker who charged that the German auto manufacturer is a "magnet for organized labor, intentionally."
Sen. Bo Watson slams VW over labor policies, UAW recognition (timesfreepress.com)
Some of the rancor likely relates to this story from last month:
Anti-UAW Volkswagen employee suspended (nooga.com)
German workers have also demanded that U.S. autoworkers be given co-management benefits that they enjoy.
The Transatlantic Trade and Investment Partnership (TTIP) would eliminate all tariffs between the United States and European Union. Germany’s labor unions have criticized the deal, while auto industry bosses have endorsed the agreement. "We will not accept a softening of standards for environmental and consumer protection or a hollowing out of worker rights and the right to co-determination," the trade union IG Metall said in a joint press release with union representatives of Daimler, BMW, Ford, Opel as well Volkswagen's divisions VW and Porsche. Workers´groups insisted that while fewer tariffs and the creation of common technical standards may be beneficial for German industry, the trade deal must ensure labor rights including union representatives the right to vote on significant strategy goals such as shutting down a factory. This should also be guaranteed in the United States, the statement highlighted. In Germany, the law guarantees that labor representatives at large corporations have half the board of directors’ seats allowing, workers to voice their opinions and proposals in the company’s strategies.
http://www.telesurtv.net/english/news/German-Auto-Workers-Fight-for-Rights-as-US-Trade-Deal-Looms-20150127-0043.html
Wages are much lower for American workers at parts companies than at car manufacturers, though both have trended down. In 2014, the average hourly wage for production and other nonsupervisory workers at car-parts makers was $19.91, down 23% from a decade earlier in inflation-adjusted terms. That compares with a 22% decline to $27.83 at makers of motor vehicles, according to the Bureau of Labor Statistics.
Kevin Hobbs, president of the United Auto Workers local that represents workers at the American Axle plant where pay starts at $10 an hour, said members struggle to meet basic living expenses. One major consolation is that health-care benefits are excellent."
U.S. Car-Making Boom? Not for Auto-Industry Workers (sorry, registration WSJ link, unless you can find it on Google)
What Kia got was $76 million in job tax credits over five years, $61 million to buy and prepare the project site, a $20 million for a job training center at the plant. and $130 million in property tax abatements for a period of 15 years. That's about $410 million dollars. They also got a CSX rail spur brought in.
The only downside that I see with allowing Kia to locate in this site was that there were other areas already prepared to host a plant that size. There was an industrial area that had the infrastructure in place only 20 minutes away. But most of these companies looking for handouts typically want a greenfield area where they have more control.