Bailout Nation 2: General Motors

[RedScare]

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

The good news is that most of the Texas losses would be in DFW. They'd lose the GM Arlington plant AND their NASCAR track. Think of the fun we'd have laughing at them.

[barracuda]

The good news is that most of the Texas losses would be in DFW. They'd lose the GM Arlington plant AND their NASCAR track. Think of the fun we'd have laughing at them.

I was in the metroplex last weekend. What a brown, drab and depressing place to be in the winter.

If they lose NASCAR, that would be fine with me. I would just as soon setup some chairs alongside 610 then pay to watch cars add to our carbon emissions by driving pointlessly in circles. I guess I'm incapable of getting beyond the absurdity.

[RedScare]

I was in the metroplex last weekend. What a brown, drab and depressing place to be in the winter.

If they lose NASCAR, that would be fine with me. I would just as soon setup some chairs alongside 610 then pay to watch cars add to our carbon emissions by driving pointlessly in circles. I guess I'm incapable of getting beyond the absurdity.

But, that's not all. What about lost royalties to Bob Seger and John Mellancamp? What about Tiger Woods' lost endorsements? What about Toby Keith? For the love of God, think about Toby Keith!!!

And the Giant Pipeline Worker dudes. How will they get to work?

[barracuda]

But, that's not all. What about lost royalties to Bob Seger and John Mellancamp? What about Tiger Woods' lost endorsements? What about Toby Keith? For the love of God, think about Toby Keith!!!

Oh, but he loves America enough to profit from vapid patriotism!

Just keep him off future episodes of The Colbert Report. Please!

[Jeebus]

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?

That was priceless!

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.

Enron is a horrible example as they sold a commodity versus the Big 3 selling products. Enron itself went out of business, but did all the plants that they owned shut down as well, or get bought up by other energy companies? The same would be true for whichever of the Big 3 that would file. At least half of those factories would be bought up immediately, as they would be multiple times cheaper than expansion via new construction, and/or they would come with the purchase of a bankrupt brand name (think Cadillac).

The only people out at Enron were the white-collar employees of Enron, and not the blue-collar plant workers of their subsidiaries. The same would probably be for GM or Chrysler. All the pencil pushers would be lost in the bankruptcy, but all the plant workers would be brought on with the plant sale and purchase - just no UAW.

Also with a collapse would come the selling of brand names. There's no way the Chevrolet pick-up, the Corvette, or even the Cadillac would just go away. They would still carry the badge, but just be under different ownership.

You act like EVERYONE and EVERY company in the world is about to file for bankruptcy. Simply not true.

[20thStDad]

NASCAR is a safe and necessary distraction to so many rednecks. I don't know if I could handle them hanging around places I do on Sunday when they have nothing to do. I like them kept busy by their redneckery. Less people die than at the old Roman coliseum, and it keeps the mob of neckdom happy, I say keep it.

So, seriously. They are still selling cars. Is it not an obvious answer that they need to lay off and shut down to the level of what's being sold right now? I don't see how that wouldn't be a way to stay in business, and even profitable, after the write-offs from all the shut downs.

[RedScare]

Also with a collapse would come the selling of brand names. There's no way the Chevrolet pick-up, the Corvette, or even the Cadillac would just go away. They would still carry the badge, but just be under different ownership.

You act like EVERYONE and EVERY company in the world is about to file for bankruptcy. Simply not true.

I'm not sure what selling brand names has to do with jobs, since the badge is simply a marketing tool. If a division, or the entire company is sold, the employees go with it, a la Chrysler. If the company bankrupts, not necessarily so. For instance, in an 11 B'cy, contracts would be broken, and creditors would be paid pennies on the dollar. So, big layoffs would occur at both GM and its parts suppliers. That is not the worst thing that happens, as their sales are down 40%.

But, in a B'cy, consumer confidence will drop, causing even fewer sales. They will also still need loans, and the banks aren't lending. Ch. 11 is not a sure thing by any stretch. If the 11 fails, Ch. 7 is next. This is liquidation. This is where all the employees are laid off and the assets sold to whoever will take them. You can buy the rights to the Corvette name, but there is no vehicle attached to it...and no factory or employees to build it.

There is also the matter of the vehicle warranties. Not only do the sharehollders lose their stock, but warranties are no longer honored, as there is no more GM. GM sells about 9.3 million vehicles a year, each with a warranty. I wonder how many GM vehicles are currenty under warranty? 20 million? 25 million? All gone in a Chapter 7.

Then there is the pension program. If GM collapses, the pensions are at risk. They are protected under the Pension Benefit Guaranty Corp. If GM's pension program becomes insolvent, its 432,000 retirees and 260,000 employees would be covered by PBGC. How much would that cost US workers and taxpayers? I don't know, but the biggest PBGC payout occurred in 2003, when Bethlehem Steel went bankrupt. PBGC was on the hook for $3.7 Billion for 97,000 retirees and workers...1/7th the number of GM retirees and workers. If the numbers worked out the same, the cost to either US workers or taxpayers...likely both...would be $26 Billion just for the pensions. And that is hard costs, not a loan like the $14 Billion being requested now.

All this tough talk seems to ignore a lot of costly realities in letting the auto industry collapse. I understand the thrill Republicans would get in watching the UAW implode along with GM. I just hope that that thrill is worth the tens of billions of dollars it will cost us.

Disclosure: I am neither a union member or a Big 3 vehicle owner. Worthless warranties would not affect me.

[20thStDad]

I'm not sure what selling brand names has to do with jobs, since the badge is simply a marketing tool. If a division, or the entire company is sold, the employees go with it, a la Chrysler. If the company bankrupts, not necessarily so. For instance, in an 11 B'cy, contracts would be broken, and creditors would be paid pennies on the dollar. So, big layoffs would occur at both GM and its parts suppliers. That is not the worst thing that happens, as their sales are down 40%.

But, in a B'cy, consumer confidence will drop, causing even fewer sales. They will also still need loans, and the banks aren't lending. Ch. 11 is not a sure thing by any stretch. If the 11 fails, Ch. 7 is next. This is liquidation. This is where all the employees are laid off and the assets sold to whoever will take them. You can buy the rights to the Corvette name, but there is no vehicle attached to it...and no factory or employees to build it.

There is also the matter of the vehicle warranties. Not only do the sharehollders lose their stock, but warranties are no longer honored, as there is no more GM. GM sells about 9.3 million vehicles a year, each with a warranty. I wonder how many GM vehicles are currenty under warranty? 20 million? 25 million? All gone in a Chapter 7.

Then there is the pension program. If GM collapses, the pensions are at risk. They are protected under the Pension Benefit Guaranty Corp. If GM's pension program becomes insolvent, its 432,000 retirees and 260,000 employees would be covered by PBGC. How much would that cost US workers and taxpayers? I don't know, but the biggest PBGC payout occurred in 2003, when Bethlehem Steel went bankrupt. PBGC was on the hook for $3.7 Billion for 97,000 retirees and workers...1/7th the number of GM retirees and workers. If the numbers worked out the same, the cost to either US workers or taxpayers...likely both...would be $26 Billion just for the pensions. And that is hard costs, not a loan like the $14 Billion being requested now.

All this tough talk seems to ignore a lot of costly realities in letting the auto industry collapse. I understand the thrill Republicans would get in watching the UAW implode along with GM. I just hope that that thrill is worth the tens of billions of dollars it will cost us.

Disclosure: I am neither a union member or a Big 3 vehicle owner. Worthless warranties would not affect me.

So add all of that cost to the $14B that they would get on loan and never pay back, and it's even more. Has anyone presented any good plans with numbers on how that loan would be used to forge a permanent solution to the problem? I feel like it would be too small to "fix" everything, so why do it? I still say there will be massive layoffs and shut downs no matter which way it goes.

I hope whoever buys Ford gets rid of their stupid logo. Every other car company has some sort of normal looking logo thing for the front of their cars (well, except Chevy, that sucks too), but Ford has to totally stupid looking blue oval with cursive Ford in it. I've always thought it looks so cheap and crappy compared to the simpler "symbolic" uni-color ones that other companies have.

Disclosure: I own a GM vehicle, past its warranty. Wasn't planning on buying big-3 next time around, but that is not for a long time coming, when the one I have catches on fire and burns to oblivion.

[marmer]

I don't understand the widespread resistance to the idea of the _cultural_ significance of GM, Ford, and Chrysler. Their contributions to the American way of life, the twentieth century's industrial fabric, and the nation's wars are somehow irrelevant because, now, in times of crisis, they need taxpayer help? And why do they need this help? To finance the costs of developing better vehicles, to find a way to accomodate their shrinking market share, and to minimize the job losses that will undoubtedly be coming. Why is this not a worthy objective?

It's funny because, here, on this architecture forum, if we were talking about a building that was nearly a hundred years old and one of our nation's great edifices, there would be a giant outcry if it were endangered for purely financial reasons. "Tear it down, it's old-fashioned. It's not efficient. It can't compete." Pathetic. That's the only word for it.

Look, let's say I get my way and Congress funds everything that GM and Chrysler is asking for. Still, there will be significant job losses and production cuts. Plants will close and dealers will lose their franchises. (buying out dealer franchises is one of GM's big cash outlays, by the way. They took a big hit from that when they killed Oldsmobile.) The excess inventory will have to be dealt with. There will still be struggles with the UAW and with pension funding. But then the decent cars, the desirable, fuel-efficient, low-emission cars, will come to market sooner. And people will buy them. And if GM does their downsizing on their own time, to their own plan, the suppliers aren't bankrupted, maybe the job losses are managed more gradually, the warranties are still honored, spare parts will still be available, and hey, presto, the loans get paid back. Maybe even early, as Chrysler did the last time.

GM's two big mistakes, if you had to grossly over-simplify, were 1. to let cost-cutting drive vehicle design because of pension costs and 2. to resort to deeply discounted prices to sell these substandard vehicles, making their profit per vehicle negligible and making the American consumer expect GM vehicles to be sold at loss-leader prices. You won't find any member of management at GM who is not working desperately to find a way out of that mess. But remember, it costs tens of millions of dollars to redesign an existing vehicle and more like a few billion to create a new one.

And the transplants don't have those pension and medical care costs, having a fraction of the number of workers and retirees. And you'd better believe that national health care and retirement benefits in Germany and Japan are a big part of the puzzle, because plenty of foreign-built autos are sold here alongside the ones built domestically by the same makers.

[marmer]

So add all of that cost to the $14B that they would get on loan and never pay back, and it's even more. Has anyone presented any good plans with numbers on how that loan would be used to forge a permanent solution to the problem? I feel like it would be too small to "fix" everything, so why do it? I still say there will be massive layoffs and shut downs no matter which way it goes.

I suspect that the simple answer is to continue with the current plans for product development, dealer buyout, inventory reduction, plant closure, and union negotiation and wait for improved products and a generally stronger economy to have a positive effect.

I hope whoever buys Ford gets rid of their stupid logo. Every other car company has some sort of normal looking logo thing for the front of their cars (well, except Chevy, that sucks too), but Ford has to totally stupid looking blue oval with cursive Ford in it. I've always thought it looks so cheap and crappy compared to the simpler "symbolic" uni-color ones that other companies have.

Now, that's just mean. You're baiting us car guys, that's all there is to it. I promise you no one who seriously considers a Ford or Chevy is turned off by the traditional logo, and the brand identity it confers is way too valuable to throw away.

Disclosure: I own a GM vehicle, past its warranty. Wasn't planning on buying big-3 next time around, but that is not for a long time coming, when the one I have catches on fire and burns to oblivion.

You've hinted at another good thing about domestic cars. A generation ago, cars that were out of warranty were nearing the end of their useful life. A car that made it to 100,000 miles was nearly worn out. Now, 100,000 plus is commonplace, as are cars that are more than ten years old. Oh, and about that fire thing -- the only recent domestic fire issue I know of is the Ford recall because of cruise control circuits. There were at least two major press releases and efforts to recall those vehicles. That sounds like due diligence and a good faith effort to fix a known problem.

My disclosure: I own four cars. Don't worry, all you tree huggers, I also own five bicycles! I like wheels.

1986 Honda Civic Wagon, 210,000 miles. Not the reliability or fuel economy champ you might expect, but still runs. For sale, btw.

1993 Toyota Camry Wagon, 312,000 miles. As comfortable and unpretentious as an old pair of jeans. No signs of slowing down.

1999 Audi A4 Wagon, 158,000 miles. An absolute joy to drive. Not the fastest, nor the most economical, nor the most reliable. Expensive to buy and expensive to repair. Spectacularly beautiful inside and out, even after nine years. Worth every penny and makes the commute a joy every day.

2003 Chrysler Town and Country, 78,000 miles. Bone reliable, well-designed, a completely quality product. Wish it were an '02; the '03s felt the brunt of Daimler-managed de-contenting (window switch lights, glove box light, electric windshield defroster, etc.)

[memebag]

I don't understand the widespread resistance to the idea of the _cultural_ significance of GM, Ford, and Chrysler.

It's the cost. Chipping in a few bucks to protect a piece of artwork, a historical document or beloved structure doesn't compare to the cost of supporting a failing multinational corporation. It just doesn't make economic sense to pay to keep a group of people making cars because of the resonance of the name they've inherited.

[RedScare]

I hope whoever buys Ford gets rid of their stupid logo. Every other car company has some sort of normal looking logo thing for the front of their cars (well, except Chevy, that sucks too), but Ford has to totally stupid looking blue oval with cursive Ford in it. I've always thought it looks so cheap and crappy compared to the simpler "symbolic" uni-color ones that other companies have.

Can we talk about LSU midfield logos next?

[Subdude]

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?

[Subdude]

Ugly? Must be in the eyes of the beholder. I personally see several design classics in that list, unlike the jellybean cars that were coming from Japan at that time. And, rightly or wrongly, no one was really using fuel economy as a choice factor back then.

In all fairness, it was Ford more than anyone that was responsible for the popularity of "jellybean" styling. Remember the Tempo?

[Subdude]

What would you suggest? Surveys show well over half the populace would not buy from an automaker in bankruptcy (the "bailout" that was going through Congress was intended to be a bankruptcy without the stigma of going to court). We've lost 1.2 million jobs in the last 3 months. Would you rather roll the dice and see if all this is a bluff? If it is not, will your mea culpa make it all better? Is this when we should be testing our willingness to buy from bankrupt automakers?

I understand the tough talk about the Big 3. I even understand the requirement that good Republicans must trash the UAW. But, the $700 Billion given to the financial industry to loosen up credit did not work. There is no one to lend to the Big 3. And with US auto sales down 37% across the board, the foreign auto makers are not going to buy up the Big 3 and reopen the plants. If their factories do not build enough cars, they will ship them from Japan.

Again, what do you suggest?

I ask you the same question I asked the editor.

It's OT, but credit markets have begun to loosen over the past week or two, although still nowhere near to the level of pre-crunch. Second, there is every reason to expect foreign makers to buy US plants. That has been their strategy for decades. With the dollar weakening, and most forecasts calling for that to continue, it makes a lot of sense to build locally rather than import.

[jm1fd]

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.

That will probably work for some suppliers, but it will be the death of many. A supplier losing 50% or 75% of their business is going to get hurt BAD. This is especially true if they have a huge long term investment in tooling and equipment. You can't lay off tooling and equipment....the bank wants to get paid for it whether you're putting it to good use or not.

[TJones]

All this tough talk seems to ignore a lot of costly realities in letting the auto industry collapse. I understand the thrill Republicans would get in watching the UAW implode along with GM. I just hope that that thrill is worth the tens of billions of dollars it will cost us.

No one is talking about a collapse of the Big 3, nobody wants that. We are talking about restructuring, and THEN get the infuse of cash from the Govt. if it is still needed. Gotta get rid of the bad deal with the UAW first Red. UAW may have made concessions, but they didn't want to implement them until a year or two down the road. So, they drain the bailout money the Big 3 gets now, and then we are back where we started in a few months.

[marmer]

In all fairness, it was Ford more than anyone that was responsible for the popularity of "jellybean" styling. Remember the Tempo?

Ah, the Tempo. One of the three worst cars Ford ever built, along with the Pinto and Fairmont. A horrible excuse for an automobile, to be sure, but the louvered grille and slab sides disqualify it as a jellybean car. This is more along the lines I was thinking:

[TJones]

Guys, THIS is a jellybean car, per Ford. This is the epitome of Ford's "OVAL" design cues.

Ford Probe:

Ford Taurus is even worse. Everything from the front lights to the back window was "OVAL" insprired.

Now Ford's angle is the "3 bars" concept, along with staying afloat.

[barracuda]

In all fairness, it was Ford more than anyone that was responsible for the popularity of "jellybean" styling. Remember the Tempo?

Actually, it was the Ford Taurus that introduced the aerodynamic "jellybean" style. The original Taurus was designed to help Ford meet tighter CAFE standards in the 80's. Like it or not, jellybean aerodynamic styling does improve fuel efficiency. It's also the preferred car of RoboCop.

[Daniepwils]

Letter I sent to S J Lee...(not that she cares)

Ms. Lee, I would like to let you know that I am against the auto bail out, as is the majority of the American population. This country was founded on the basis of capitalism and bailing out the auto industry is anything but. Those companies made bad choices, one being not to invest in alternative fuel means. Instead the majority of these companies actually bought patents and technology from other people and companies to hinder the production of a vehicle that runs on alternative power essentially shooting themselves in the foot. We should not bail them out as it would start a precedent that every other failing company could use to gain government aid.

I find it very dishearten when the majority of American's are not for this bailout yet the majority of our government leaders are. This shows just how out of touch the American government is with the people of America. Remember! The people you are suppose to be working for!

[crunchtastic]

To honor the Big 3 and the city of Detroit, I think I'll watch Robocop tonite. Love that movie. What was the car the guy was yammering about before he exited out the high-rise window? The 6000 SUX? A relevant commentary on current events.

And of course, Robocop 2 for the Houston tie-in.

[memebag]

When you say "jelly bean car", I immediately think of the Ford Taurus. Maybe you mean something else by that term.

[marmer]

[20thStDad]

Can we talk about LSU midfield logos next?

Yeah they didn't run that one by me either. Unacceptable.

[Fringe]

What if out government sent stimulus checks to anyone who purchases a new vehicle. Make it a stock $5k to $10k check, for those that purchase a new vehicle from the big three. You could give more for buying hybrids and fuel efficient vehicles.

The money would go directly to the consumer, guaranteed, and even used as a down payment in which case the buyer "signs over" their future check giving it directly to the dealer.

Only those actually buying a vehicle will get the checks.

This would guarantee cash flow into the big three, and would favor each of the big three differently...according to those selling the cars people want most. If most want to buy Ford or GM over Chrysler, then Chrysler will not be aided as much...survival of the fittest.

Additionally, each tax dollar spent will benefit BOTH the consumer AND the auto companies, and each dollar spent will lead to a sale.

Just an idea.

[LTAWACS]

What if out government sent stimulus checks to anyone who purchases a new vehicle. Make it a stock $5k to $10k check, for those that purchase a new vehicle from the big three. You could give more for buying hybrids and fuel efficient vehicles.

The money would go directly to the consumer, guaranteed, and even used as a down payment in which case the buyer "signs over" their future check giving it directly to the dealer.

Only those actually buying a vehicle will get the checks.

This would guarantee cash flow into the big three, and would favor each of the big three differently...according to those selling the cars people want most. If most want to buy Ford or GM over Chrysler, then Chrysler will not be aided as much...survival of the fittest.

Additionally, each tax dollar spent will benefit BOTH the consumer AND the auto companies, and each dollar spent will lead to a sale.

Just an idea.

That would mean adding an extra monthly note to my budget. Currently I don't have one as the vehicle I drive is paid off. In these times of stagflation I don't think many would want to go out and get another monthly note.

[editor]

GM says if it doesn't get a bailout, it's going to kill the Volt.

http://www.msnbc.msn.com/id/28279245/

General Motors Corp., anxiously awaiting a government loan so it can continue operations into 2009 said Wednesday it will halt one of its most important projects to save money should a Washington bailout fall through.

The cash-strapped automaker is putting the breaks on the construction of a factory in Flint, Mich. set to make 1.4 liter engines for the Chevrolet Cruze and Chevy Volt plug-in electric car.

Yeah, that's the way to win over the public sentiment. People will just go buy from the Japanese or the Europeans or the South Koreans or whomever decides to make cars that the majority of people actually want while Detroit cries in the corner about how unfair the world is. Go cry, emo corp.

My last four vehicles were American (two cars, two trucks). if I were to buy a car in the future, it would probably be from a company that gets it.

[RedScare]

Public sentiment got them a drop dead when they were still going forward with the plant.

What would you do? Your bonds are lower than junk. The banks will not lend to you. You asked your government for a loan to continue operating, so that this vehicle could be built. Their response? 'Drop dead!' So, faced with the prospect of going under before January, do you continue spending money on a factory that will build a vehicle that doesn't even have batteries yet, and will not come online until 2010 or 2011, and will cost $40,000 in a deepening recession, and whose claim to fame is that it uses hardly any gas while the bottom has fallen out of gasoline prices?

Or, do you put every dime toward putting out the vehicles that you can actually sell today? Sales may be down 27%, but isn't 7,000,000 vehicles built and sold better than an unfinished factory intended to build vehicles in 2010?

Do I need to point out Prius sales to make my point?

[barracuda]

GM says if it doesn't get a bailout, it's going to kill the Volt.

http://www.msnbc.msn.com/id/28279245/

Yeah, that's the way to win over the public sentiment. People will just go buy from the Japanese or the Europeans or the South Koreans or whomever decides to make cars that the majority of people actually want while Detroit cries in the corner about how unfair the world is. Go cry, emo corp.

My last four vehicles were American (two cars, two trucks). if I were to buy a car in the future, it would probably be from a company that gets it.

The article only says they will delay construction of the factory because they don't have the cash. They apparently are still planning to release the Volt as scheduled. It would be pretty serious if they dropped the Volt, as they've been pinning the future of their image on that car. I say image, because they only plan to sell something like 10,000 of them in the first year.

...Volt and Cruze development will continue as scheduled and the company still plans to bring them to showrooms in 2010. The construction delay may be temporary until the company figures out its cash situation.

Basel would not say when construction might resume if government loans are made available, but she said there is plenty of time to build the plant, install equipment and get it up and running in time to produce engines for the two new cars. The company already makes the 1.4-liter engine at a plant in Austria, she said, giving GM another option for supplying the engines.