Bailout Nation 2: General Motors

[editor]

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?

I think you've nailed it there -- the American automakers are always looking toward next quarter, rather than long-term. Sure, gas prices are lower now (I still won't call it reasonable for another 50 cents). But they were sky high just 12 months ago. And who knows where they're going to be 12 months from now. How about 2010 or 2011 when these cars are supposed to roll off the assembly line? Does GM come back to the public with its hand out again saying it had no idea that there wouldn't be more oil in 2011 than there was in 2008? Does GM have some crystal ball that tells it that we'll still be in a deep recession in 2011?

Japanese companies are famous for their longevity planning. Dozens of books have been written about it. There are seminars offered to businesses all the time about it. The guys running the Big Three must be too busy pumping another $100 into their Hummers to walk down to the local SBA office for some insight.

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

Actually, yes. That would be helpful. I don't keep up on car sales figures. As far as I can tell, the Prius is doing quite well. I don't think I can walk down to the bank without seeing one or two. Certainly I've seen 100x more Priuses on the streets in the last two years than Hummers, or even pickup trucks. Even some of the taxis are Priuses (sp?).

[barracuda]

But again, they're not delaying the Volt. They're just delaying a factory that would build engines. They already have another factory that builds the same engine.

[RedScare]

I think you've nailed it there -- the American automakers are always looking toward next quarter, rather than long-term. Sure, gas prices are lower now (I still won't call it reasonable for another 50 cents). But they were sky high just 12 months ago. And who knows where they're going to be 12 months from now. How about 2010 or 2011 when these cars are supposed to roll off the assembly line? Does GM come back to the public with its hand out again saying it had no idea that there wouldn't be more oil in 2011 than there was in 2008? Does GM have some crystal ball that tells it that we'll still be in a deep recession in 2011?

Japanese companies are famous for their longevity planning. Dozens of books have been written about it. There are seminars offered to businesses all the time about it. The guys running the Big Three must be too busy pumping another $100 into their Hummers to walk down to the local SBA office for some insight.

Actually, yes. That would be helpful. I don't keep up on car sales figures. As far as I can tell, the Prius is doing quite well. I don't think I can walk down to the bank without seeing one or two. Certainly I've seen 100x more Priuses on the streets in the last two years than Hummers, or even pickup trucks. Even some of the taxis are Priuses (sp?).

You, like most others, seem to think that a business should act the same way during good times and bad, when sales are good, and when in its death throes. Comparing GM and Toyota today is disingenuous. Has GM made massive mistakes? Absolutely! Go read my posts about them for the last 3 years. Should they do things differently? Of course. Do you instruct the maintanance guys to continue to install the new engine while the Titanic is sinking? Not in my world, but I'm a pragmatist.

I don't have time to google it right now, but Prius sales have tanked with the economy. Toyota's profits have plunged $10 Billion. Toyota' and Honda's unions (yes, UNIONS!) are protesting the layoffs in Japan. Times are tough.

[editor]

You, like most others, seem to think that a business should act the same way during good times and bad.

It depends on the company. Do I think a tiny company like the Artefaqs Corporation should do the same things in good times and bad? No, because there's no padding. But General Motors is not a small company. It's had 100 years and trillions of dollars to prepare for this and to make sure it doesn't happen. But it is. And because it failed to prepare for the future it's failing in the present.

I believe that GM has enough fat that it could continue to build the factory with or without a government bailout, and that it's making a threat as a scare tactic.

[editor]

I've Googled around and can't find anything saying the Prius tanked with the recession.

I found information showing Prius sales increasing every year in the U.S. from 2001 through 2007. I found another article stating that in the beginning of 2008 (when we were in a recession) Prius sales increased each month for the first quarter. Then I found an article saying that Prius sales were down 40% in May, 2008 but it was attributed to the factories not being able to produce enough of them to meet demand and the dealers had less than a one day supply on hand. Nothing about people not buying Priuses because of the economy.

What search terms are you using that show the Prius is doing poorly? I'd also be interested in data comparing Prius sales to those of the Detroit passenger vehicles.

I won't say "comparable class" since Detroit is still half a decade away from producing anything comparable to the Prius, which I was surprised to learn came out in 1997 -- 11 years ago.

[TJones]

Chrysler is shutting down all 30 plants for a month.

[barracuda]

I've Googled around and can't find anything saying the Prius tanked with the recession.

Here's one (also in post 348):

http://www.greendaily.com/2008/12/03/car-c...-off-in-demand/

Sure, everyone's jumping on the bandwagon to slam the US auto industry for not being tuned in to consumer demand, focusing on innovation, or joining the green movement. But according to last month's sales figures, the problem is not nearly so cut and dry. Of the 16 most popular cars and trucks in America, the one with the most dismal sales performance right now is without a doubt the Toyota Prius, with a 48.3% drop in demand from one year ago. Go figure.

[barracuda]

By the way, I am all for building more efficient cars. However, I wasn't impressed with the Prius I rented over the summer. The dashboard was kludgy, with multiple different-looking displays. The car felt awkward and uncomfortable inside. And it certainly didn't have much torque, although I guess that is to be expected.

I think the idea of a "green" car is great for corporate image, but I feel it makes more sense to retrofit an existing popular car, like the Honda Civic, to be more fuel efficient (hybrid or not) rather than compromise with a odd looking car with the sole purpose of getting good gas efficiency. I'm also not completely convinced that hybrids are all that good for the environment, as the production of the batteries is very resource intensive and involves lots of toxic substances itself. Kind of like trading one problem for another. Hopefully they will get cleaner over time, as I would certainly love to get 40+ MPG or the 100+ MPG Chevy is promising with the Volt.

[jm1fd]

I believe that GM has enough fat that it could continue to build the factory with or without a government bailout, and that it's making a threat as a scare tactic.

You're starting to sound like a tin-foil-hat-wearing kook with those sorts of comments.

GM is already producing the 1.4L engine in question at a plant in Austria. I don't know if that facility is running at full capacity or not, but I would suspect that it wouldn't cause them too much pain to divert a modest amount of output from Austria to the Volt for a year or two while the US plant comes online.

[RedScare]

By the way, I am all for building more efficient cars. However, I wasn't impressed with the Prius I rented over the summer. The dashboard was kludgy, with multiple different-looking displays. The car felt awkward and uncomfortable inside. And it certainly didn't have much torque, although I guess that is to be expected.

I think the idea of a "green" car is great for corporate image, but I feel it makes more sense to retrofit an existing popular car, like the Honda Civic, to be more fuel efficient (hybrid or not) rather than compromise with a odd looking car with the sole purpose of getting good gas efficiency. I'm also not completely convinced that hybrids are all that good for the environment, as the production of the batteries is very resource intensive and involves lots of toxic substances itself. Kind of like trading one problem for another. Hopefully they will get cleaner over time, as I would certainly love to get 40+ MPG or the 100+ MPG Chevy is promising with the Volt.

It has to be more than a little frustrating for the Big 3 that the same Republican lawmakers who beat down attempts at upping the CAFE standards and enacted huge tax breaks for people who bought SUVs with a gross vehicle weight over 6,000 pounds are now telling them that they run their companies like crap, and should fail as punishment for their poor management practices and not beuilding more fuel efficient vehicles.

[20thStDad]

It has to be more than a little frustrating for the Big 3 that the same Republican lawmakers who beat down attempts at upping the CAFE standards and enacted huge tax breaks for people who bought SUVs with a gross vehicle weight over 6,000 pounds are now telling them that they run their companies like crap, and should fail as punishment for their poor management practices and not beuilding more fuel efficient vehicles.

Yep. Blame the pusher, blame the user...but both can go to jail in the end. Just because someone else enabled them doesn't absolve them from where they find themselves.

[RedScare]

Yep. Blame the pusher, blame the user...but both can go to jail in the end. Just because someone else enabled them doesn't absolve them from where they find themselves.

If you are saying GOP lawmakers are no better than drug dealers, I am inclined to agree with you. And, the Big 3 certainly asked the GOP led Congress to pass that legislation. Still, for the group that brought "freedom fries" to the congressional cafeteria to tell the companies that embody American business to drop dead is more than a bit ironic.

[20thStDad]

If you are saying GOP lawmakers are no better than drug dealers, I am inclined to agree with you. And, the Big 3 certainly asked the GOP led Congress to pass that legislation. Still, for the group that brought "freedom fries" to the congressional cafeteria to tell the companies that embody American business to drop dead is more than a bit ironic.

I don't think politicians on either side look out for anything more than their own interests. I believe they'll make this final bailout decision by the same motivation. Public service is a pipe dream. There is only self service.

[TJones]

Red, those same lawmakers are gonna tap into the TARP fund before the year is out, or at least before Obama gets into office. Then once your boy is in, he will be their magic genie, and grant the big 3 whatever their heart desires.

[marmer]

I don't always agree with George Will, but he has a good take on Ford and Alan Mulally:

http://www.chron.com/disp/story.mpl/editor...ok/6170313.html

And Peter De Lorenzo's wrapup of the auto industry's year of 2008 is well worth reading. He bashes where bashing is due and gives credit where credit is due.

http://www.autoextremist.com/

[TJones]

Red, you can rest your weary head. Bush has come to alleviate your heartache. I supplied the link to Bush, the great giver. Don't you Dems. feel bad for all your trash talk now.

http://www.nytimes.com/2008/12/20/business...rss&src=igw

[memebag]

Red, you can rest your weary head. Bush has come to alleviate your heartache. I supplied the link to Bush, the great giver. Don't you Dems. feel bad for all your trash talk now.

http://www.nytimes.com/2008/12/20/business...rss&src=igw

Do the Republicans feel bad now that capitalism has failed?

[TJones]

Do the Republicans feel bad now that capitalism has failed?

I guess Socialism will ring, is that to the delight of the Dems. ? The Messiah will already have a foothold coming into office ?

I feel bad. You can't put a band-aid on a gunshot wound.

[Subdude]

I guess Socialism will ring, is that to the delight of the Dems. ? The Messiah will already have a foothold coming into office ?

I feel bad. You can't put a band-aid on a gunshot wound.

Ugh. I always hate when these things turn to politics. Not to belabor the obvious though, you are aware of course that it was a Republican administration that bailed out the car companies, nationalized AIG and the GSEs, partly nationalized the US banking system, and paid for it all by printing dollars and doubling the deficit? I'm not arguing that any of these were right or wrong, times being what they are, but you know the old saying about how there are no atheists in foxholes? I think there should be a corollary added that in economic crises, all political parties become socialist.

Anyway, it looks like GM & Chrysler live to die another day. After the bill died in Congress I was concerned that the eventual bailout would be less stringent, but it appears to have fairly stringent conditions. Interesting that Ford chose not to participate.

[editor]

Ran across this today. I'm sure some of you will get a giggle out of it.

[memebag]

I guess Socialism will ring, is that to the delight of the Dems. ?

The "Dems."? Did Bush jump parties?

[musicman]

looks like canada is trying to get a piece of the pie offering a 3.29 billion loan

[TJones]

One: Ford didn't want a bailout, they wanted lines of credit in order to be able to pay suppliers if the other 2 went under. They apparently have enough cash on their own now for at least a year. B: Canada pumped money into the GM and Chrysler subsidiaries up there to keep form having to pay out more welfare for the time being and risk losing those plants forever. That move right there should be a wake up call to the big 3 to bring their parts manufacturing back to U.S. soil.

Meme, one man does not a Republican party make. Your cohorts in Congress got what they wanted and got someone else to do their dirtywork for them. When this money dries up from the UAW draining it again and we are back to square one, I am sure you will be the first to stand up for Bush and say, "Well, at least he tried, good job Mr. President." Or are you already getting that warm, fuzzy feeling about him ? I like Bush, but I can definately disagree with this call, again, it's a band-aid on a gunshot wound.

[Subdude]

The "Dems."? Did Bush jump parties?

Can the political talk be done in the politics area please?

[TJones]

Can the political talk be done in the politics area please?

Subdude, this whole thing is very political now. If the bailout works, is Bush gonna be called "hero" for saving the Big 3 ? No, it will be pointed out that the Dems. were right all along and that they would have eventually gotten the bill passed. If it doesn't work, it will be just one MORE epic Bush failure, and it will be all forgotten that any Dem. in Congress wanted to give the Big 3 any money. It is ALL about Big Govt. now Subdude, the Pandora's Box has been opened.

[memebag]

looks like canada is trying to get a piece of the pie offering a 3.29 billion loan

Mmmm, Canadian pie.

[Subdude]

If some Chinese firm wants to have a go at selling Saturns I say let 'em at it. If they can manage to make a buck at it then they deserve the profit.

Sorry to quote myself but they must have read that post. Found this on GM Inside News Forum

GM likely to sell Saturn brand to China's SAIC?

GM likely to sell Saturn brand to China's SAIC

By Kelly From:Gasgoo.comDecember 12, 2008

Shanghai, December 12 (Gasgoo.com) SAIC is likely to be the potential buyer of Saturn, the flagship brand under General Motors (GM), China Automotive Review reported.

GM, urgently in need of cash, is in talks with its Chinese partner SAIC, which is a potential buyer for Saturn, according to Saturn dealers.

Saturn, a

[Subdude]

How long before we are asked to pony up again to prop them up?

Subdude answers himself, "Two months! Two stinking months and they're back for more!" *fist pounds table*

Automakers Seek $14 Billion More in Aid

DETROIT

[Subdude]

GM circling the drain?

According to an unnamed source speaking with Reuters, General Motors "is in 'intense' and 'earnest' preparations for a possible bankruptcy filing." The report states that GM could be split into two separate entities; one "new" unit consisting of the General's successful brands (read: Chevrolet and Cadillac) and an "old" unit made up of its less-profitable endeavors (Hummer, Saab, Pontiac and Saturn).

Link

[crunchtastic]

GM circling the drain?

Link

I just read a story somewhere that GMAC is going to start back up again with sub-prime auto loans in order to move inventory.

It all is starting to point to a bankruptcy.