“Everybody thinks high gas prices hurt sport utility sales,” said Robert A. Lutz, the vice chairman of G.M., in an interview last month. “In fact they don’t.”
If you are like me, by this time you are getting tired of bailing out Corporations that have failed due to their own incompetence. Now we are being forced to bail out another industry that doesn’t seem to know how to run it’s business properly. Taxpayers will take the hit for the auto industry, one that has ignored all projections and continued to build gas guzzling muscle cars like the Hummer. The handwriting has been on the wall for as long as you or I can remember, and yet the auto industry executives continued to ignore trends. So the question is, due to it’s total failure, should we bail out GM? And after that why not bail out Circuit City, Starbucks, and don’t forget about Linens and Things.
WASHINGTON – Struggling to keep alive a government bailout of the troubled auto industry, key supporters offered concessions Friday — including reducing its $25 billion size. The White House came out firmly against a Democratic plan to carve it out of a $700 billion rescue package for financial companies.
The measure gained important ground among Republicans on Capitol Hill, where at least a dozen to 15 GOP votes in the Senate will be needed to prevent opponents from blocking it in the Senate. The focal vote on that could occur as early as next Wednesday.
Sen. Kit Bond of Missouri became the second Republican to publicly voice support for the idea, joining Sen. George Voinovich of Ohio. Both states have major auto plants. Several other GOP senators signaled they might accept a rescue for Detroit’s Big Three if it contained strict conditions for the beleaguered companies, including management and salary changes, concessions from their powerful unions, and a commitment to making more fuel-efficient vehicles. Alan Reuther, the United Auto Workers union’s legislative director, said one option under consideration was a smaller, more targeted amount of funding “that would get the companies through to March.” He said the union was “open to discussing various options like that. There’s a need for immediate action.”
General Motors Corp., Ford Motor Co., and Chrysler LLC have been clamoring for such aid as their industry is battered by the economic meltdown, which has choked off sales and frozen credit. GM has said it might not survive through year’s end without a government lifeline.
$30 Million dollar portion of Bailout already earmarked for bonuses for 50 executives.
NO!
They should use the corporate bankruptcy system and file chapter 11. Reorganize smaller and more nimble. The stock is near worthless now anyhow, so the stockholders who let the BoD run GM into the ground get what they voted for.
The cold hard fact is that they are larger than their market share justifies. They need to shrink big time. No matter what, jobs and rich retirement entitlements are lost. There are too many brands, dealers, and obligations. Tax payer funded bailouts are just pissing the money away.
In addition, they plan to ship these jobs overseas anyhow. So the idea that we are saving jobs is a joke. They would ship the jobs to China and Mexico in a New York Minute if it would save a penny.
The best thing for the automakers to do is a reorg BK to get them out from under their crushing debt. Handing them money simply pays creditors a little longer and delays the inevitable. Management gets to collect more paychecks and fly the corporate jet a few more times.
If they go BK, they are going to be reorganized, not liquidated, so all this BS about workers and suppliers getting kicked to the curb is just that.
Every time I see an article like that I have to laugh. They always seem to be surprised that these industries are effectively stupid from the top down, with everyone at every level in it for themselves at the expense of the company.
The auto industry consolidated too much long ago and nobody has wanted to do anything about it. The only way to fix the problem is to bankrupt them, break them up, and then reset the market into smaller, more nimble chunks, with new companies and new labor contracts. The same can be said for the airlines and for some retailers.
The larger the retail organization, the less innovation and the more likelihood they will get caught in any downturns and change in customer tastes.
There was a good sized cadillac dealer up the road from my client. Around 2004 they built a hummer dealer right beside them. Around 2006 the whole operation folded. The place was empty for over a year, then a furniture retailer moved in. They are now pushing 40-60% off sales.
Smart folks, good times, good times.
If you have ever been ‘overseas’ either to the East or the West, and seen or driven the great cars that both GM and Ford produce ‘over there’ …
You wouldn’t give them a dime.
Believe it or not, one of the best cars i ever drove was an Australian FORD Falcon.. kind of like a BMW M5…
GM produced the Holden which was just as nice.
So where are these cars?
No bailout, especially since a bailout is likely to be coupled with a condition that they make more fuel efficient cars that Americans don’t want.
Jim’s correct.
US automakers have pushed legalization that kept them from making cars that were 1. more fuel efficient (I’d bet the Saudis love this as well as their terrorist pals) and 2. were less safe 3. generally pieces of crap.
Now they cry because imports are kicking them to death with the help of high oil prices and vastly superior imports.
I say let them die by their own swords. Go Chapter 11.
What the Federal Government can do is pass comprehensive health care reform bills that will shift burden of retirement health care to a Federalized system.
Yea, yea, yea, all you right wing wackos will love that, but here’s something that big business AND the far left BOTH want.
Americans do want fuel efficient vehicles, sorry Mike. A bailout wouldn’t be fair to the US’s other auto industry across the south which is building Toyotas, Mazdas, BMWs, and Hyundais.
No Bailout!
We are witnessing a change.
#5 – Lyin’ Mike
“No bailout, especially since a bailout is likely to be coupled with a condition that they make more fuel efficient cars that Americans don’t want.”
Gosh. I knew you were a liar, Lyin’ Mike, but are you a terrorist too?
For a mere $1,000 Billion I can GUARANTEE that everyone will go to Heaven!!!
Now that is something the ‘present administration’ should invest in!!!
Really!!
No bailout. Their short sightedness got them into this mess, let them figure their own way out.
If Congress does decide on some sort of government assistance package, it should be contingent on wage, benefit, and salary concessions, and it should happen soon. One of the unique aspects of automobiles versus many other types of merchandise is the ongoing nature of the relationship between a customer and the manufacturer. The uncertainty of a car company’s long term viability has significantly eroded the market, as if the credit crunch hadn’t already caused deep enough wounds.
Included in the sale price of every car is a warranty that may reach five years or more into the future. The value of that warranty, along with the ready availability of parts and service, is now becoming more of a crap shoot with every passing day.
To borrow a line from a popular car ad, kids, this ain’t your daddy’s America. In some respects, it’s getting to be more like your grandaddy’s America.
bailout won’t work… nationalize detroit under a nasa style org until it can be really fixed… this aside, shouldn’t any company, bank or other wise, that comes looking for a bailout agree to pay it’s ex’s on the same wage scale as government workers get???
Agreed- File Chapter 11, the CEO’s go with no golden parachute AND (drum roll please) the Unions too.
NOPE..
Is this the 2nd or 3rd Auto bailout??
They could of REDESIGNED the plants YEARS ago..
They could of MONITORED the number of Vehicles MADE and ADJUSTED, insted of making 1,000,000’s of cars EVERY YEAR…
They could of LOOKED for a down turn, and CUT back, and SAVED jobs. EVEn those in Mexico(not USA)
In general I think that bailing out the auto companies would be a mistake, see the notes from others above regarding reorg. bankruptcy and making them smaller, more nimble and increasing competition. That said I think that it would kill the politicians (at least their reelection contributions) to let the automakers go under so I suspect they’ll do something for them. IF this is going to be done why don’t they use the carrot and stick approach like they use with the states?
We will save you/give you money IF you do X, X and X. For example, require increases in the CAFE standards, tie some of the money to environmentally friendly vehicle development (for SALE, not just blow hot air with prototypes, etc). Use the fact that they need our money to continue to exist to put them in a position to make radical changes in the way they do business. The auto companies (particularly in the US) have done very little innovation in the last several decades, it’s time for them to change.
It’s a loan stupids, not a bailout. Chrysler had a loan to keep if from sinking in the early 1980’s, they paid it all back with interest. Their stock soared. They made better cars than before. They bought AMC Jeep, and your tax dollars became more dollars.
Auto companies are incredibly complex machines and this messed up banking and credit problem put them in a bind. Saying they are the ones that are “stupid” is “stupid” stupid.
It’s not about efficiency, how about building a decent car? Foreign car maker quality still exceeds domestic quality.
The problem is once the big 3 fail so does the supply chain and surrounding industries. Should we let those fail too?
Why should anyone be surprised that those that don’t believe in Darwinism are the most ardent supporters of the Bailout?
I have seen a comparison between GM and Volkswagen for their six best sold models last year, and you dont know if you should laugh or cry. Sorry friends, GM is already dead. There is no way that GM can catch the economy, technology, and style of their german competitors. And let not talk about Toyota and others …
If you mean republicans, then you fail. They are against the bailout. The Dems are the ones pushing it.
OK, so I’m the loner here. I say YES !!!
There is just too much at stake here to just turn around and say “Eff you GM”. If GM dies, so goes the rest of our manufacturing base.
BUT
I would attach conditions such as the Government getting a portion of ownership, the unions (workers) get some seats on the Board, keep manufacturing in America, fuel efficiency become a prime concern, etc,.
We have already lost our steel manufacturing sector, electronics, and textile industries. We will never ever regain them if we allow those who decide only the top, richest people get to run everything and use people as pawns. Shipping jobs overseas is not the way to do it or even shopping jobs from State to State looking for the best deal.
I just don’t see GM being able to reorganize inorder to make a profit and pay back a loan.
Another thing, as soon as the big three get their bailout loan, the united auto workers will go on strike for more money.
of course, we’re already communist so why should we discriminate which businesses get money.
The US automakers would burn through $25 billion in no more than 2 years. And for what gain?
I’d be for a small bailout ($3-5 billion).
Just enough to give them a few months to breathe to enact some dire changes, cut what they need to, etc.
The $700 billion bank bailout was insane.
Bailing out Fannie Mae and Freddie Mac was insane.
Bailing out Bear Stearns was insane.
Bailing out AIG was probably insane, but they are an insurance company so that’s harder to say because there are limits to insurance companies ability to handle crisis situations.
[Think 9/11, Hurricane Katrina, etc.]
I have a feeling these bailouts is lining the pockets of politicians and corporate big wigs.
#24 – Mr. Fusion
>>fuel efficiency become a prime concern
You’re never going to get that one by Lyin’ Mike. He HATES those little fuel-efficient fuckers. Waste, baby WASTE! THAT’S the Amurrican way!
Other than that, you are right. There’s too much at stake to “just say no” to GM. There will be a lot more collateral damage than just a bunch of overpaid douche bags making shitty decisions and crappy cars getting slapped on the wrist.
If the Big Three go down the tubes, not even Obama, and all Obama’s horses and all Obama’s men will be able to undo the economic armageddon that will follow.
Just yesterday, well-known investment adviser Jim Cramer predicted that a GM failure would translate into a haircut of another 2000 points off the Dow, due to the massive surge in unemployment, including the ripple effects. Time to grab your 401Ks and IRAs (which are probably somewhere down around your ankles already).
I’m looking to buy stock in a company that manufactures handbaskets for the ride to Hell.
I don’t mind them bailing out the auto companies, but only if they fire everyone in the company above riveter. Every executive, and every manager, gone without so much as a dime in severance pay.
im obligated to preface my comments by saying i do work for GM as an electrician. But there are some things that not loaning money to the Big 3 will create. First, if GM files for bankruptcy, you now put 700-800,000 retirees now on the government payroll. yes, that number is correct. GM will push the retiree bill onto the PBGC and now instead of 25-50 billion you, the taxpayers, will now be responsible for roughly 150 billion in retiree benefits. Want more?? ok, you will then get some more. Unemployment in the U.S. will now hit at least 10% guaranteed. How do we pay for all the fiancial bailouts, Iraq, universal healthcare, et.al. that the new Obama adminstration wants with 10+% unemployment? Want more?? Ok, with the bankruptcy of GM, you will then send one state, Michigan, into bankruptcy also. Already Detroit is asking for 10billion to cover themselves, and we havent even had a bankruptcy filing yet. There will be countless other towns (see Lordstown, OH for one) that will basically cease to exist. The financial markets seem to be taken care of, now lets see if the lawmakers really care about main street. But I do ask one thing please, call it what it is. It is gonna be a loan unless congress appropriates TARP money for it, which I personally dont think it will. This money will be paid back with interest. People at my factory (Ft. Wayne Assembly, makers of Silverado and Sierra trucks) do understand the gravity of this situation, and don’t take all of this lightly. But the facts remain. The costs of NOT giving GM and the other automakers money will be far greater than giving them the money. If the Big 3 fail, how will the market cope with the loss of 4-5 million less cars being made? Car and truck plants do not turn on new products in a month or 2 months. It will take years. So seriously, if you all enjoy Hyundais and Daewoos (most people can’t afford BMW, mercedes, et.al.) then let’s just all go down together…just my 2 cents