Bailout Nation 2: General Motors

[memebag]

Let's say we let one US automaker fail. That's attractive because it gives the others a chance to pick chunks of the failed company for cheap, and also gives them a better chance at growing their market share.

The downside is that none of them want to be the first to fail, so they cook the books and try to bluff their way through. Then we end up with one gone and the rest in worse shape than they are now.

[Mark F. Barnes]

I got news for you, those books have been on London Broil for some time already.

[memebag]

I got news for you, those books have been on London Broil for some time already.

Sure, but imagine the pressure to not be the first one to flinch. I can see that scenario producing lies undreamed of in human history.

[Deut28Thirteen]

What I don't get is how the goverment rejects a bailout for consumers, but whats us to fit the bill on two bailouts.

[dudemeister]

Problem is if General Motors were to fall, it would take Nissan, Toyota, Honda, and Ford with it, since they all rely on the same demand for automotive parts in the U.S.

Thus any manufacturing would cease to exist for at least a few months, and the problem would take at least say four or five years at a minimum to correct itself.

Not only that but companies that manufacture automotive parts such as Delphi, and other businesses such as car dealers could go out of business.

Truthfully if a bailout were to occur they should just get rid of all management and top executives, not give out any severance pay for top management, and probably split General Motors up into three or four different companies.

The UAW will probably lower the pay to $14 or $15 dollars an hour, compared with the $27 hour back in the 50's or 60's.

[TJones]

Problem is if General Motors were to fall, it would take Nissan, Toyota, Honda, and Ford with it, since they all rely on the same demand for automotive parts in the U.S.

Thus any manufacturing would cease to exist for at least a few months, since the problem would take at least say three or four years at a minimum to correct itself.

Not only that but companies that manufacture automotive parts such as Delphi, and other businesses such as car dealers could go out of business.

Truthfully if a bailout were to occur they should just get rid of all management and top executives, clean house, and probably split General Motors up into three or four different companies.

Ummm, Nissan doesn't really share ANY parts with GM product. Most parts for the Jap cars you typed are manufactured in either Japan or Mexico and in some cases Canada. Nissan buys and uses hardly any parts from Delphi, and usually only then as a cheap aftermarket alternative.

As far as car dealers, only those car dealers flying a GM flag would subsequently go out of business. One has nothing to do with the other. The only symbiotic relationship there would be is the absorbsion of a GM market share split among the remaining 4 you mentioned as GM buyers would have no alternative.

[dudemeister]

Well even parts suppliers other than Delphi, can run out of money and shut down, thus it would still hamper their operations of those companies regardless. The global credit crisis we have now affects car sales regardless, the only difference is that the big three were already in bad shape mostly due to the UAW being too greedy.

Personally I would rather see the Big Three sign up for Chapter 11, that way no bailout money would be needed and these companies can be given time to reorganize.

[memebag]

Problem is if General Motors were to fall, it would take Nissan, Toyota, Honda, and Ford with it, since they all rely on the same demand for automotive parts in the U.S.

Huh? If they share the demand, then they will benefit from GM's failure. One less supplier, so more demand for the remaining companies.

Thus any manufacturing would cease to exist for at least a few months, and the problem would take at least say four or five years at a minimum to correct itself.

You're saying that without GM, no one else would manufacture automobiles? I don't follow.

[dudemeister]

Sorry my post was not very clear.

What I was trying to say is General Motors is too big for it to go out of business. Alot of automotive suppliers like Adelphi, Eaton, Visteon, and Magna manufacture parts for cars assembled in the U.S. wether it is for Toyota, Ford, or Chrysler. If General Motors went out of business it could drive these companies out of business as well, causing a shortage of parts for companies like Toyota.

Even foreign brands with U.S. operations such as Toyota could be seriously affected, therefore causing a halt on any manufacturing done here, thus causing some layoffs. Due to the global credit crisis demand for new cars would decrease, because it would be harder to secure financing, since during a recession people will hold off buying a new car.

Since one out of ten jobs depend on the automotive industry it would be devastating, since no one would want to buy out a company like GM if they were to accumilate alot of debt, when there is no demand for new cars or trucks, thus more jobs would be lost without being replaced.

If a bailout were to take place then someone like Honda or Toyota would probably be more tempted to buy out GM, since they would not be inheriting alot of debt.

It's kind of like a similar situation with the banks, since those stronger companies would be more more tempted to buy out their weaker competitors since they won't accumilate alot of debt.

What I am thinking about what will happen is that GM will be split up into three smaller companies:

Pontiac

Cadilac

Buick

There are many ways to change and adapt the auto industry. Dropping chaos onto Detroit, Cleveland, Youngstown, etc is about the worst possible option.

[BryanS]

What I am thinking about what will happen is that GM will be split up into four smaller companies:

Dodge

Pontiac

Cadilac

Buick

First, Dodge is Chrysler, not GM... and there is no real separation among GM brand names/badges. A Pontiac "Firebird" was also known as the "Chevrolet Camaro." A GMC Sierra... aka... Chevrolet Silverado. You either keep all the GM brands, or you eliminate them all, at this point.

It makes NO SENSE for GM, or any automaker, to merge with any other automaker, for the same reason that it makes no sense for every airline to merge with every other airline: there is too much capacity - currently.

We should assist the auto industry, through these tough times, just like we did with Chrysler in 1980's. It paid off then, it will pay off in the future.

[Jeebus]

I could see GM ditching it's Chevy & Pontiac cars (minus the Corvette), and just sticking to trucks & Buicks - or just maybe trucks?

[memebag]

Sorry my post was not very clear.

What I was trying to say is General Motors is too big for it to go out of business. Alot of automotive suppliers like Adelphi, Eaton, Visteon, and Magna manufacture parts for cars assembled in the U.S. wether it is for Toyota, Ford, or Chrysler. If General Motors went out of business it could drive these companies out of business as well, causing a shortage of parts for companies like Toyota.

Delphi is already bankrupt and has been for years. It's a GM spin-off and sells mostly to GM. No one will be surprised if it goes out of business with or without GM's bankruptcy.

Visteon is a Ford supplier, spun off from Ford like Delphi was spun-off from GM. They'll be fine as long as Ford is around.

Eaton mostly makes superchargers. Auto makers will survive the loss of Eaton, if for some reason GM's bankruptcy triggers that.

Magna is sufficiently diversified that the loss of GM won't kill them. The demand for cars isn't going away if GM files for bankruptcy protection.

[TheNiche]

Sorry my post was not very clear.

What I was trying to say is General Motors is too big for it to go out of business. Alot of automotive suppliers like Adelphi, Eaton, Visteon, and Magna manufacture parts for cars assembled in the U.S. wether it is for Toyota, Ford, or Chrysler. If General Motors went out of business it could drive these companies out of business as well, causing a shortage of parts for companies like Toyota.

Even foreign brands with U.S. operations such as Toyota could be seriously affected, therefore causing a halt on any manufacturing done here, thus causing some layoffs. Due to the global credit crisis demand for new cars would decrease, because it would be harder to secure financing, since during a recession people will hold off buying a new car.

If there's a monopoly on the production of certain parts, why wouldn't the parts suppliers just raise their prices to stay afloat? Even if they've got a long-term contract with Toyota, locking in prices, surely Toyota would rather renegotiate than lose the producer altogether. If worse came to worse, I suspect that Toyota would rather buy the parts producer than see it go out of business.

The cost would undoubtedly be passed on to the consumer and aggregate car sales would fall, but because GM would no longer exist and their market share would've been captured by the remaining car companies, sales, profitability or production in any one company probably would not be dramatically affected.

What I am thinking about what will happen is that GM will be split up into four smaller companies:

Dodge

Pontiac

Cadilac

Buick

How does that help the financial position of these firms?

[Mark F. Barnes]

I could see GM ditching it's Chevy & Pontiac cars (minus the Corvette), and just sticking to trucks & Buicks - or just maybe trucks?

Actually GM is in better shape than the other two financially, and units sold. GM has GEO Isuzu percentages to fall back on, which they have been for the past year. Also I sincerely doubt they'd drop the new Camaro since they have over 1500 prepaid units to deliver. I got notice my delivery date has been pushed back to March 20th for mine since I ordered the big block SS, final assembly won't be complete until March 10th and I take delivery in Conroe on the 20th. Chrysler will be the first to drop, they lost they're Europian purse strings and have been slowly slipping off since. They are all but done, they have nothing to compete with the other two. GM have talks about a Merger ongoing with Chrysler, I think that will actually happen and it will be GM/Chrysler and Ford left standing. That's just the way I see it.

[Jeebus]

In your opinion, what would GM continue to make with the Chrysler badge? Maybe just Jeep & a revised Dodge line-up? I could easily see them dropping the Chrysler cars all together.

[Mark F. Barnes]

Yes, Chrysler would be just like Pontiac, Buick, Cadillac, etc. The trucks would be consolidated, They could then offer the Cummings as an alternative power unit, and the fabulous Dana rear ends. GM's new Hybrid motors could be retro-fitted into the Chrysler lines, getting the up to speed in the Green Race. You can bet any moneys the Obama Administration offers as incentive, will have that stipulation attached. From the Big Three, GM's Hybrid Program is miles ahead over the other two. GM already offers Full Size SUV's and Cars, and Heavy Duty Trucks in Hybrid Power. Ford has Hybrids There are people who will not part with their full size SUV and Trucks, GM is offering that in a Hybrid. Ford is coming along too, but Chrysler has nothing to compete with them, and certainly not the Japanese Hybrid Cars.

If the Dollar can hold it's own, Oil Prices will stay lower, and in turn so will gas prices. Things will come around, it's just going to take time. Car sales are a death wish right now, because of the tighter financing. But that will loosen up as well eventually. But mainly the Big Three have got to get rid of the UAW. That parasite's time has past. Toyota, Honda, and Nissan plats here in America have proven that completely. The UAW has big gun lobbyists trying to protect their interests through Congress, but the writing is on the wall.

[rsb320]

I wonder if the Chevy Volt and its technology will arrive on the market in time? I think that these will be hot sellers because they'd appeal to 75% of the market (driving under 40 miles/day) with no gas. They Volt is due out on the market late 2010.

[JJVilla]

It's a sad state for US automakers and it would be easy to bash them here (which has not generally happened). They have created of many their problems but the unreal myth of foreign superiority plus many of their competitors are subsized by their governments (one way or another) hasn't helped. There's too much overlap - especially with GM (GMC - Chevy is the best example).

After owning several German (BMW) cars I tried to compromise and looked at our company incentives with GM, Chrysler & Ford - long story short I bought a Volvo this month. Half-way there - Swedish car owned by American compnay.

[Jeebus]

If the Dollar can hold it's own, Oil Prices will stay lower, and in turn so will gas prices. Things will come around, it's just going to take time. Car sales are a death wish right now, because of the tighter financing. But that will loosen up as well eventually. But mainly the Big Three have got to get rid of the UAW. That parasite's time has past. Toyota, Honda, and Nissan plats here in America have proven that completely. The UAW has big gun lobbyists trying to protect their interests through Congress, but the writing is on the wall.

I agree with this 100%. Unions are killing the free market, especially the UAW. I know they had a place once, to ensure equal wages and benefits - but today, if you don't like what you're getting when you're hired, then don't apply.

On a personal note, we've only owned Hondas and Toyotas for the last 10 years. Its the comfort of knowing they won't break down - which none have.

[editor]

I agree with this 100%. Unions are killing the free market, especially the UAW. I know they had a place once, to ensure equal wages and benefits - but today, if you don't like what you're getting when you're hired, then don't apply.

Agreed. I believe that unions have a place in America -- coal mining. Maybe janitorial work. But since when do TV anchors making $5 million/year need the "protection" of a union? It's the union that needs them, not the other way around.

Slightly off-topic rant. I now return you to your regularly scheduled thread.

[BryanS]

In your opinion, what would GM continue to make with the Chrysler badge? Maybe just Jeep & a revised Dodge line-up? I could easily see them dropping the Chrysler cars all together.

To me, whoever acquires whom would simply shut down all production of the "losing" acquiree, to reduce capacity. Both GM and Chrysler make cars and trucks. If one of them made only cars, the other made only trucks; you would have a combined company that makes both. They would complement each other. But since they already make both... it makes no sense to keep both names. A Ford, GM, and Chrysler pickup... all pretty much are made and drive the same on the road. Why offer a Chevy Silverado and a Dodge Ram? Doesn't make sense. It also doesn't make sense that if I make cars and trucks, and am losing my shirt, that I would want to acquire another company that makes cars and trucks, that is also losing its shirt.

Also, people are almost religious when it comes to their make and model of vehicles. You will never see a Chevy truck with Chrysler hemi engine in it. No one is going to buy that. So you really can't even mix the parts. All you can really do is buy your competition and shut them down.

[TheNiche]

Also, people are almost religious when it comes to their make and model of vehicles. You will never see a Chevy truck with Chrysler hemi engine in it. No one is going to buy that. So you really can't even mix the parts. All you can really do is buy your competition and shut them down.

Ford bought Mazda and then used standard off-the-line Ford engines in Mazda-branded vehicles. Aside from a handful of die-hards, it hasn't seemed to be major news.

[TJones]

I could see GM ditching it's Chevy & Pontiac cars (minus the Corvette), and just sticking to trucks & Buicks - or just maybe trucks?

Why would any company get rid of their biggest name brand seller, i.e CHEVY ? You get rid of the dogs like Buick, and GMC. The only reason Pontiac is still there is because of the Holden line of cars. If it weren't for the Escalade, Cadillac would have already gone bye-bye. I can see them ditching everything but Chevy and Caddy, and going ahead and getting Dodge, then ditching everything there but the Jeep and the Cummins brand and the minivan, possibly the Viper.

Too bad on that Camaro Mark, you should have just bought this brand new GT-R sitting on my showroom.

[Mark F. Barnes]

Why would any company get rid of their biggest name brand seller, i.e CHEVY ? You get rid of the dogs like Buick, and GMC. The only reason Pontiac is still there is because of the Holden line of cars. If it weren't for the Escalade, Cadillac would have already gone bye-bye. I can see them ditching everything but Chevy and Caddy, and going ahead and getting Dodge, then ditching everything there but the Jeep and the Cummins brand and the minivan, possibly the Viper.

Too bad on that Camaro Mark, you should have just bought this brand new GT-R sitting on my showroom.

BINGO! This is exactly what I am talking about. I think they may also keep the Challenger and Charger, these retro throwbacks are still a seller, and the Hemi will definitely stay. Anyone says that they wouldn't want a Chevy truck with a Big Block Hemi SRT in it, is either lying or not a real car person and is just running their mouths. Hemi is legendary on the race track, and most of the die hard brand lovers are race related in some way, either a fan, Saturday night dirt tracker, or professional racer, in some for or fashion. Hemi rules the drag strip, everything in the nitro classes run a Hemi, no matter what body they have on them. The Hemi will survive any merger I feel for certain.

Yeah But the GT-R does not fit in my Bow Tie collection. Got to keep the Series Going.

[TJones]

BINGO! This is exactly what I am talking about. I think they may also keep the Challenger and Charger, these retro throwbacks are still a seller, and the Hemi will definitely stay. Anyone says that they wouldn't want a Chevy truck with a Big Block Hemi SRT in it, is either lying or not a real car person and is just running their mouths. Hemi is legendary on the race track, and most of the die hard brand lovers are race related in some way, either a fan, Saturday night dirt tracker, or professional racer, in some for or fashion. Hemi rules the drag strip, everything in the nitro classes run a Hemi, no matter what body they have on them. The Hemi will survive any merger I feel for certain.

Yeah But the GT-R does not fit in my Bow Tie collection. Got to keep the Series Going.

Hell, I'll spend $20 of my own money and slap one of those GAWDAWFUL gold bowties on the front of it for you, if it means that much !

[jm1fd]

From the Big Three, GM's Hybrid Program is miles ahead over the other two. GM already offers Full Size SUV's and Cars, and Heavy Duty Trucks in Hybrid Power. Ford has Hybrids There are people who will not part with their full size SUV and Trucks, GM is offering that in a Hybrid.

GM's large vehicle hybrid platform was jointly developed with Chrysler and BMW, and is comprised of some VERY VERY expensive parts, but boy are they great if you want to tow a boat with a hybrid! (Why you'd want to spend ungodly amounts of $$ on a hybrid to tow a boat 8 times a year I have no idea)

GM's small vehicle hybrid platform leaves a lot to be desired but it is cheap.

Ford's upcoming hybrids on the other hand are going to kick some major ass....38 MPG city in a car that's a good bit larger than the Prius.

I wonder if the Chevy Volt and its technology will arrive on the market in time? I think that these will be hot sellers because they'd appeal to 75% of the market (driving under 40 miles/day) with no gas. They Volt is due out on the market late 2010.

It will be a "hot seller" but it isn't going to be a big volume car, and GM is planning on losing money on every car sold.

[jm1fd]

Ford bought Mazda and then used standard off-the-line Ford engines in Mazda-branded vehicles. Aside from a handful of die-hards, it hasn't seemed to be major news.

That's not accurate. Ford adopted Mazda's MZR family of engines for it's 4-cyl needs, and Mazda is using the Ford Duratec engines in their cars when a V6 is needed.

Anyone says that they wouldn't want a Chevy truck with a Big Block Hemi SRT in it, is either lying or not a real car person and is just running their mouths. Hemi is legendary on the race track, and most of the die hard brand lovers are race related in some way, either a fan, Saturday night dirt tracker, or professional racer, in some for or fashion. Hemi rules the drag strip, everything in the nitro classes run a Hemi, no matter what body they have on them. The Hemi will survive any merger I feel for certain.

You do realize that the modern "Hemi" is a Hemi in name only, don't you? It isn't some unique, groundbreaking design like the Hemis of years past.

[TheNiche]

That's not accurate. Ford adopted Mazda's MZR family of engines for it's 4-cyl needs, and Mazda is using the Ford Duratec engines in their cars when a V6 is needed.

Ah, OK. I've got the V6.

[TJones]

You do realize that the modern "Hemi" is a Hemi in name only, don't you? It isn't some unique, groundbreaking design like the Hemis of years past.

What do you think HEMI means jm1fd, and don't wikipedia it either.

[jm1fd]

What do you think HEMI means jm1fd, and don't wikipedia it either.

Hemi is an abbreviation of hemispherical which refers to the shape of the combustion chambers cast in the head.