General Motors Corp. and Chrysler LLC told the federal government they need at least $21.6 billion more combined in bailout loans to put them on the road to recovery, and outlined possible scenarios if either auto maker should have to file for bankruptcy protection.
Both GM and Chrysler, in the recovery plans submitted Tuesday to the U.S. Treasury, argue that bankruptcy would be more costly and drawn out than government-funded restructurings.
GM said it might need as much as $100 billion in financing from the government if it were to go through the traditional bankruptcy process. Rick Wagoner, GM’s chairman and chief executive, said the bankruptcy scenarios are “risky” and “costly” and would only be pursued as a last resort.
Chrysler’s plan said the company would likely have to file for Chapter 11 protection if it doesn’t get additional loans from the government and concessions from unions, creditors and dealers. It said it would need $24 billion in financing if the company were to file for bankruptcy. But company officials said in a conference call that they believe a Chapter 11 filing is “not necessary” for Chrysler’s survival.
The stimulus package should require the US population to spend their stimulus on US products. This may be an American car for some families and will naturally stimulate the US auto industry (from the bottom-up). It should work hand-in-hand with the stimulus. Don’t just give them money for building a crappy product. That’s rewarding failure. Let another company (remember the Saturn car company?) come up to bat if the existing companies can’t make it.
# 33 scumola said, “The stimulus package should require the US population to spend their stimulus on US products.”
Umm, the average tax payer will get a $400 tax credit from this whole mess. How is that going to purchase a car?
#33…don’t feed the troll
The “let them fail” crowd is speaking from emotions rather than logic. The bill for letting them fail would also include their suppliers and contractors, maybe twice the number of GM employees. The costs just multiply as this goes on. But GM needs to make severe cuts, and we need to start buying American made stuff again.
Despite being basically libertarian, I actually think that a federal takeover of GM and Chrysler might work out best in the long run.
They did it with the Northeastern railroads with Conrail back in the 70s, and it worked out quite well. One of the reasons was that Conrail, unlike the predecessors, was able to shed unprofitable routes, duplicate facilities, and improve service to a point that customers began to return.
Yes, the feds put a lot of money into Conrail in the early years. But it ultimately became profitable, and was sold to private (well, corporate) owners at a profit.
if you are cutting 46k jobs, stopping three models of cars (hummer, saab, and saturn) AND need 20+ Bil, it might be time to think of another industry….
There are lot’s of ways to stimulate the economy, bailouts aren’t one of them. Bailout’s what happens when private interests get so gimungous they can extort society by saying give me some money or your country’s going down the drain. This isn’t helping it’s making things worse. If we’re lucky someday, somebody will realize that it’s not good for a country to have private interests that get this large.
Giving them loans isn’t going to destroy the world. And if they STILL go under, most likely we’ll still get most of the money back since the government makes sure their loan guarantees are higher up in the food chain for bankruptcy.
Restructuring should involve: removing the board and higher ups and replacing them with a better team (I notice shareholders aren’t rushing to do squat about them… why is that?) ALL workers in the companies should take a 5% pay cut. 100%. Top of the line to the bottom. With a short term cost of living freeze. UAW should accept it with the stipulation that when the company starts being profitable again the COL freeze is removed. UAW seems to think they can just sit and keep their hand, when there are no chips to win here.
The carmakers MUST drop the local dealer model entirely. This doesn’t work any more, and they spend far more money trying to make it work than they get in return. They can’t do complete Just-in-Time building, but they CAN tool some factories to be more order-specific and able to switch quickly to generate customer requirements — at an extra cost for the convenience.
I don’t think people want THAT car they saw on the tv — they want THEIR car, which is LIKE that car. The automakers don’t seem to grasp that concept.
It’s probably also fair to say that the fed allowing: fuel prices to do what they did, banks to do what they did, and encouraging companies to send jobs out of the country, are all good reasons to smack down the government, too. These things all combined with the October Freak-Out to put the auto industry in the shitter.
GM and Ford have been restructuring and offering retirement incentives for many years, they haven’t been sitting idle all this time burning up capital. True they didn’t make massive and severe cutbacks 12 months ago, but nobody expected all this, or Bush to do absolutely nothing for his entire final year.
When we elect a$$holes to run our country–only because they are against killing pre-born babies and all that other crap–this is what we get. If you voted for Bush in 2000, raise your hand…
Jim, agree about the dealer model, it’s a relic from a bygone era. Recall this from earlier in the week here on this blog:
http://tinyurl.com/djbv2x
31
Well, gee. Since I mentioned it to you in another comment thread I figured you’d have “guessed” it. But, it’s tough being the CEO of your mothers larder…
“MORE RAGU MOM!”
“OK Snookums!”
“I’M THE CEO! IF THE BOARD WOULD LET ME, I’D FIRE YOU!”
#27 – The UAW fights to line their own pockets. They try to get unskilled and semi-skilled labor paid like high-skilled which makes their product to expensive and also devalues high-skill jobs, completely fucking the whole economy. Not to mention paying by length of service rather than ability and output which just screws things up worse by removing incentive.
The battle between unions and corporations is a pendulum swing. I Detroit it swung too far to the union side about 30-40 years ago, hence their problems.
Pretty cheap compared to bailing out the banks and their Chief Ponzi Officers.
43,
Richard Wagoner made 14.5 million dollars in 2007. 1.5 million was his base salary. And what did his vision provide GM? Losses? Or is that the fault of the line worker?
And, judging by your answer, you would not want the salary and benefits of a UAW worker. I guess you work for free, or at best minimum wage to make sure your company stays “competitive?”
#35 we need to start buying American made stuff again.
No we don’t, we need to make quality products Americans want to buy.
“The carmakers MUST drop the local dealer model entirely. ”
Absurd.
The dealer model is about providing customer service.
A major purchase — and an automobile is always one — you want to deal with real live human beings.
Not just before the sale, but after the sale. And for the next sale.
Cars have a life cycle … purchase, service, resale.
This is buiness. The US auto makers have lost the knowlegde of how to run a sucessful buiness and have dug their own graves. They shouldn’t our money.
#47
What customer service do you mean? Selling me a car? Car salesmen piss me off. They don’t work for me, they work for themselves and the damn dealer to screw me out of as much money as they can.
The US television manufacturers had a dealer model until the Japanese built a TV that didn’t need constant service. The computer industry tried the dealer model until computers became commodities. Cars are pretty much commodity items given computerized engine management systems and advances in technology that make services like tune-ups, chassis lube, and transmission service unheard of anymore.
I don’t buy my tires from the dealer. I don’t buy alignment services from the dealer. I don’t buy my gasoline from the dealer. If my car wasn’t under factory warranty, I wouldn’t even have it serviced at the dealer.
Dealer’s have 4 profit centers. New car sales, financing, service, and used car sales. Financing, service and used cars are where the money is at, and in all three there are alternatives to the dealer. So please explain why the dealer system is relevant.
Back to the topic at hand. How is loaning money to the US car manufacturers going to help when the object of the exercise to sell cars to people, which they are unable to do?
# 49 George said, “Back to the topic at hand. How is loaning money to the US car manufacturers going to help when the object of the exercise to sell cars to people, which they are unable to do?”
It won’t. 30 days in and Obamanomics is a bust.