Bailout Nation 2: General Motors

[barracuda]

Does anyone else think it's oh so very convenient that all three American automakers are going bankrupt at once? That one isn't in a better position than the others and able to buy all or a part of it? Funny how that works.

Ford is asking for a 9 billion dollar line of credit in case one of the others goes bankrupt. They are also supporting the bailout to avoid potential disruption to their operations. If any of the automakers goes bankrupt, it could cause enough of a disruption in the supply chain that it would affect Ford's ability to operate.

[barracuda]

This letter from Michael Moore really gets to the crux of the issue for me. Imagine, everyone is in an uproar about loaning 14 billion to keep millions of working Americans from the entering the unemployment line and worsening our recession. This, after barely a whimper when it comes to giving 700 billion to Wall Street for far worse mismanagement that is largely responsible for the current recession we're in. America is becoming a nation by, for, and of the wealthy who make nothing and will gladly sit by as we eviscerate the middle class but do everything possible to protect our royalty.

That's right. After giving billions to Wall Street hucksters and criminal investment bankers -- billions with no strings attached and, as we have since learned, no oversight whatsoever -- the Senate decided it is more important to break a union, more important to throw middle class wage earners into the ranks of the working poor than to prevent the total collapse of industrial America.

http://www.huffingtonpost.com/michael-moor...r_b_150661.html

[TJones]

This letter from Michael Moore really gets to the crux of the issue for me. Imagine, everyone is in an uproar about loaning 14 billion to keep millions of working Americans from the entering the unemployment line and worsening our recession. This, after barely a whimper when it comes to giving 700 billion to Wall Street for far worse mismanagement that is largely responsible for the current recession we're in. America is becoming a nation by, for, and of the wealthy who make nothing and will gladly sit by as we eviscerate the middle class but do everything possible to protect our royalty.

http://www.huffingtonpost.com/michael-moor...r_b_150661.html

Since when do companies have to fire everyone just because they declare bankruptcy ? The Big 3 workers aren't creditors, and the Big 3 can most certainly still pursue credit lines and bailout from the taxpayers while in Chap.11. Nothing wrong with breaking a union to do it either. Instead of 3,000,000 workers laid off, a couple of hundred Union Mob leaders and bookkeepers get a pinkslip for Xmas. Let them go join the Teamsters, they ain't hurting as bad.

BTW, exactly how many of these threatened autoworker families is Michael Moore helping out with the hundreds of millions he's made by exploiting their "plight" ???

[editor]

Or do all the idiot CEOs go to the same country club to talk strategy?

I think we have a winner.

Since when do companies have to fire everyone just because they declare bankruptcy ?

Almost never. It's a scare tactic. I'd like to know why the auto companies feel the need to use scare tactics in order to jeopardize my tax dollars. Isn't their situation actually precarious? Isn't there enough truth in what they're saying to justify this risky loan?

[Jeebus]

Ford is asking for a 9 billion dollar line of credit in case one of the others goes bankrupt. They are also supporting the bailout to avoid potential disruption to their operations. If any of the automakers goes bankrupt, it could cause enough of a disruption in the supply chain that it would affect Ford's ability to operate.

Wait a minute. I need this one explained to me. Nike, Reebok, and Adidas are selling shoes and Nike goes out of business. How does that HURT Reebok and Adidas??

[Jeebus]

This letter from Michael Moore really gets to the crux of the issue for me. Imagine, everyone is in an uproar about loaning 14 billion to keep millions of working Americans from the entering the unemployment line and worsening our recession. This, after barely a whimper when it comes to giving 700 billion to Wall Street for far worse mismanagement that is largely responsible for the current recession we're in.

You're right we're in that recession, but only because the banks did what the Government asked them to do, against their better wishes - which was to give out sub-prime loans.

The Government has no choice to clean up their mess by giving that money to the banks. The Government owes the auto industry nothing.

[TJones]

Wait a minute. I need this one explained to me. Nike, Reebok, and Adidas are selling shoes and Nike goes out of business. How does that HURT Reebok and Adidas??

Exactly Jeebus, I don't think there are ANY GM parts on a Ford vehicle, except for an occasional lightbulb, which is universal, so SOMEONE is gonna be making it. All I can see is an increased supply for those that can survive.

[memebag]

You're right we're in that recession, but only because the banks did what the Government asked them to do, against their better wishes - which was to give out sub-prime loans.

This it OT, but the government didn't tell banks they had to make sub-prime loans the bedrock of their risk-less, money generating default swap schemes. The big brains at JPMC came up with that one.

[Jeebus]

This it OT, but the government didn't tell banks they had to make sub-prime loans the bedrock of their risk-less, money generating default swap schemes. The big brains at JPMC came up with that one.

Hey, banks put people in homes and it nearly bankrupted them. Perhaps if GM had put millions of people in cars who couldn't really afford them under the persuasion of the government, then perhaps I would have some compassion. But its not GMAC that brought GM down, it was the shareholder's dogs and the UAW.

(How's that for steering her back on topic! )

[barracuda]

Wait a minute. I need this one explained to me. Nike, Reebok, and Adidas are selling shoes and Nike goes out of business. How does that HURT Reebok and Adidas??

Because the auto industry shares the same supply chain. Since many of the suppliers are smaller companies, they don't have the resources to survive a bankruptcy and will just close shop. Then, other automakers can't get the parts they need, setting off another chain of events.

http://www.nytimes.com/2008/12/12/business...hain&st=cse

[marmer]

Thank you, 'Cuda, for that excellent post. I am really getting tired of hearing the Detroit top management getting bashed. None of the current CEO's was in place when the worst of Detroit's problems revealed themselves and all have them have been actively working their tails off to turn things around. If you could write the marching orders for a hypothetical GM CEO, what would they be? Something like:

Figure out a way to deal with the pension costs -- check

Negotiate a new contract with the UAW -- check

Renew a commitment to fuel economy and alternative fuels -- check

Focus on product quality as the absolute top priority -- check

Bring your best Euro/Japanese market vehicles here -- check

Cut divisions, dealers, and model lines -- check

In all of the automotive press that I follow, which is a lot, the top stories for the past 18 months have been about Rick Wagoner of GM doing exactly those things. Wagoner has made a few mistakes and you can argue about his priorities, but he is a competent, experienced, car guy and there's not a great surplus of talent to replace him with. Same with Alan Mulally at Ford, late of Boeing. That was a very happy cross-pollination for Ford, as the aircraft business and the car business are similar enough for him to be up to speed on manufacturing and different enough for him to bring new ideas to the table. I have my doubts about Bob Nardelli at Chrysler, because he came from Home Depot and has a reputation as being a cost slasher and a publicity hound. But given the mess that Daimler Benz and Cerberus have made of that once proud make, I'm not by any means ready to give up on Nardelli, let alone blame him for Chrysler's woes.

And, it's been said before, but bears repeating. GM is quietly selling its corporate aviation division, something it's had since before Mr. Wagoner was born. All big companies have corporate aircraft, not just car makers. Mostly they are used to ferry engineers and designers to manufacturing plants to solve problems quickly. They are also used to transport executives efficiently and with improved security. Executive time is an asset not to be wasted lightly.

I just don't get how firing talented, experienced, popular executives and deeply alienating your labor force can be any kind of a positive situation.

[marmer]

And, I'm surprised no one has made the historical argument, so I'll make it here.

Why bail out GM and Chrysler? Because of the contribution they made to the Arsenal of Democracy. When the US needed them, they shifted production to aircraft and military vehicles of all kinds and released their workers to go to war. Did they make money on that? Sure, all American industry did. But it was the automakers' manufacturing might that turned the tide. Theirs. The capacity, the supply chain, the raw material management, the engineering knowledge. Nazi tanks were superior, but American tanks were far more numerous and easily supplied with parts.

So, now, we make a point to thank every elderly surviving WWII vet for their service.

Why not come to GM and Chrysler's aid when they need it?

Oh, and what did Mercedes, and BMW, and Toyota, and Honda, and Nissan do in the war?

[jm1fd]

Exactly Jeebus, I don't think there are ANY GM parts on a Ford vehicle, except for an occasional lightbulb, which is universal, so SOMEONE is gonna be making it. All I can see is an increased supply for those that can survive.

There are probably very few parts that are exactly, precisely the same between vehicles, but lots, and lots of parts are essentially the same technology with minor tweaks made to packaging and specifications. Compressors from Denso would be one example. Fuel injectors and O2 sensors from Bosch would be another example.

[TJones]

There are probably very few parts that are exactly, precisely the same between vehicles, but lots, and lots of parts are essentially the same. Compressors from Denso would be one example. Fuel injectors and O2 sensors from Bosch would be another example.

Exactly, so even if GM has to file bankruptcy and can't pay ACDelco for the O2 sensors, which they own and are trying to sell, ACDelco would most likely try to sell their wares to someone else. Perhaps Ford would purchase it as the increased demand might accomodate the need if their Motorcraft division can't keep up.

[RedScare]

You're right we're in that recession, but only because the banks did what the Government asked them to do, against their better wishes - which was to give out sub-prime loans.

The Government has no choice to clean up their mess by giving that money to the banks. The Government owes the auto industry nothing.

Except that your statement has been proven completely wrong.

It appears that government giving money to auto manufacturers is only wrong when it is in someone else's state. And, the state of the foreign manufacturers is not as rosy as some would have you believe.

http://www.msnbc.msn.com/id/28239206/

[editor]

And, I'm surprised no one has made the historical argument, so I'll make it here.

Why bail out GM and Chrysler? Because of the contribution they made to the Arsenal of Democracy. When the US needed them, they shifted production to aircraft and military vehicles of all kinds and released their workers to go to war.

That was yesterday. What have they done for me today?

[RedScare]

That was yesterday. What have they done for me today?

Lately, they produce about 2.5% of US GDP, employing directly or indirectly 2% of US workers, and building about half of all vehicles sold in the US. Since 70% of US GDP is consumer driven, they, through auto sales and spending of autoworker salaries, keep the economy moving. The US economy has shrunk .5% in 2008, costing 3 million jobs. It is still contracting. If it contracted another 2% through the shutdown of the US automakers, it is anyone's guess what the loss of revenue plus the loss of autoworkers salaries would do.

As for the "benefit" to foreign manufacturers with a Big 3 failure, Japan does not seem to see it that way.

http://www.msnbc.msn.com/id/28241203/

I wonder why Toyota and Honda executives are not as smart as HAIF economists?

[marmer]

I wonder why Toyota and Honda executives are not as smart as HAIF economists?

Maybe because they're tainted by working in that eeeevil, corrupt, ineptly managed, resource-wasting, environmentally-unfriendly, sprawl-inducing, climate-changing cesspit that is the (shudder) automotive industry.

[TJones]

I wonder why Toyota and Honda executives are not as smart as HAIF economists?

Red, isn't it obvious, they need the competion to keep forwarding technology, and to keep appearances that, "We aren't perfect, but we are at least better than Detroit, remember that you American Dogs, I mean consumers."

Japan needs the competition so they can continue to make a higher profit margin. There is a real threat that unions would try to infiltrate the Japanese producers HERE, if the Big 3 ain't here to push around anymore. The problem is the Big 3 can sustain in a Chap.11, not Chrysler, but GM and Ford can. Japan just doesn't want a changing view of the American people, they will lose market share, because you have those who become entranced by the waving of Ol'Glory in a commercial with a Chevy truck in it, and deep discounts that are now affordable because of the slashed labor costs.

[RedScare]

Isn't it obvious that you did not read the article?

[Jeebus]

And, I'm surprised no one has made the historical argument, so I'll make it here.

Why bail out GM and Chrysler? Because of the contribution they made to the Arsenal of Democracy. So, now, we make a point to thank every elderly surviving WWII vet for their service.

Why not come to GM and Chrysler's aid when they need it?

Oh, and what did Mercedes, and BMW, and Toyota, and Honda, and Nissan do in the war?

Invalid. That was 70 years and four wars ago. Only if the actions of those plant giving to the war effort caused this financial meltdown, then perhaps. But I doubt that is the case.

It appears that government giving money to auto manufacturers is only wrong when it is in someone else's state. And, the state of the foreign manufacturers is not as rosy as some would have you believe.

I'm well aware of plant closings, re-tooling for different line-ups, and reduced production. The difference, is that the import plants cut their losses up front, so that there is no need to go groveling to the government for a loan to inefficiently produce more of what people don't want.

And you'll never convince me that its a senator's job to clean up other state's messes, especially when his state has a dog in the fight.

Because the auto industry shares the same supply chain. Since many of the suppliers are smaller companies, they don't have the resources to survive a bankruptcy and will just close shop. Then, other automakers can't get the parts they need, setting off another chain of events.

I find it hard to believe that GM would close their doors and not be bought out - probably without even a stoppage on the assembly line. This is all just propaganda. Anytime you hear of a national franchise going under, you NEVER hear all these absurd arguments about suppliers going under as part of the ripple.

If we deny them, they will fail, go into bankruptcy, be bought out, restructured, and we will finally see detroit make a profit.

[TJones]

Isn't it obvious that you did not read the article?

I read it, they said in the LONG TERM, it would be better for them. But here in the NOW, it is important that the big 3 stay viable(not bankrupt) so that consumer confidence is not damaged any further than it already is. I think it is a little too far gone for that, don't you ?

[LTAWACS]

If American consumers dont want the cars made by the big three, then why do they buy them?

[memebag]

If American consumers dont want the cars made by the big three, then why do they buy them?

If Americans are buying Big 3 cars, why are they asking for a bailout?

[RedScare]

There IS some good news coming out all this. It will be fun to watch NASCAR crash and burn. And the best part will be that it will affect those same Southern Republican states that are fighting the bailout the most. Maybe those leather Home Depot racing jackets will become collector's items.

[TJones]

There IS some good news coming out all this. It will be fun to watch NASCAR crash and burn. And the best part will be that it will affect those same Southern Republican states that are fighting the bailout the most. Maybe those leather Home Depot racing jackets will become collector's items.

How DARE you dis' NASCAR !!! Don't make me put the "shake-n-bake" on you !

[RedScare]

I read it, they said in the LONG TERM, it would be better for them. But here in the NOW, it is important that the big 3 stay viable(not bankrupt) so that consumer confidence is not damaged any further than it already is. I think it is a little too far gone for that, don't you ?

I don't think it is too far gone yet, but I am confident that a bankrupt GM would be. Polls show few people willing to buy cars from a bankrupt automaker, so a GM in Chapter 11 would quickly become a GM in Chapter 7. As for all the companies that would swoop in and buy GM without missing a beat, as Jeebus suggests, I wonder where the money would come from, since the banks aren't lending. It is probably worth noting that Enron started in Chapter 11, before disappearing altogether. And, if the UAW is busted as part of a bankruptcy, who would work in these factories? You don't wipe out 260,000 employees and then just start back up on Monday.

[barracuda]

And you'll never convince me that its a senator's job to clean up other state's messes, especially when his state has a dog in the fight.

Well, in the case of the Big 3, it affects all 50 states. Texans in particular hold a significant portion of this, with about 53,000 jobs dependent on the Big 3.

http://www.detnews.com/apps/pbcs.dll/artic...UTO01/811190391

[RedScare]

NASCAR's problems

Note: Honda has already pulled out of Formula 1.

[TJones]

I don't think it is too far gone yet, but I am confident that a bankrupt GM would be. Polls show few people willing to buy cars from a bankrupt automaker, so a GM in Chapter 11 would quickly become a GM in Chapter 7. As for all the companies that would swoop in and buy GM without missing a beat, as Jeebus suggests, I wonder where the money would come from, since the banks aren't lending. It is probably worth noting that Enron started in Chapter 11, before disappearing altogether. And, if the UAW is busted as part of a bankruptcy, who would work in these factories? You don't wipe out 260,000 employees and then just start back up on Monday.

Again, who says you have to fire all the union employees? I think you can give them ample time to let these workers know what is about to go down, and if they wish to stay employed as a non-union worker, as part of their reorganization and keep the big 3 going, then so be it. If they don't, then they can hang out with their UAW cronies and not work, watch the Big 3 go down and not have a job at all, but hey, at least they are union.