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General Motors Wants Deeper Federal Pockets (More Big Bucks)….
…to the tune of some $16.6 billion more in federal aid. And along with that would come some belt tightening — or, perhaps more accurately, some corporate liposuction:
General Motors Corp. (GM) on Tuesday said it will need as much as $16.6 billion in additional aid from the U.S. government and could run out of money as soon as next month if it doesn’t receive at least some of that funding.
The largest U.S. auto maker, surviving on $13.4 billion in emergency loans granted in recent months, laid out a plan to close more factories, eliminate thousands of dealerships and slash 47,000 jobs this year around the world.
GM, however, said it failed to strike critical deals with the United Auto Workers union and bondholders to reduce labor costs and shrink its $47 billion debt load. Negotiations with both parties are expected to continue.
GM and Chrysler LLC, which received a $4 billion loan, faced a Tuesday deadline to submit viability plans intended to prove they could eventually stay afloat without government aid. Chrysler on Tuesday asked the U.S. government for $2 billion on top of the $7 billion it originally requested in December.
The deteriorating global economy has forced more-drastic measures to be implemented. U.S. sales in January fell well below the worst-case scenario GM laid out in its Dec. 2 request for funding. Meantime, global markets have weakened further with no signs of recovery.
Meanwhile, Chrysler is saying it needs $5 billion more in U.S. aid.
How will the public react? How will the government react? Blogosphere reaction has not been exactly favorable so far. A few reactions:
*Say Anything:
I’m not sure why the taxpayers or the government need to be involved in a restructuring of General Motors. Last week General Motors was talking about chapter 11 bankruptcy, something that would allow the company to restructure under the protection of bankruptcy laws? Why is that not good enough? Why do the taxpayers have to be on the hook for tens of billions of more in handouts, especially after the financial bailouts and the previous auto bailouts and the spending spree Obama and his fellow liberals just got passed into law?
I’ll tell you why it’s not good enough. Because chapter 11 bankruptcy would let General Motors re-negotiate all of its contracts with the unions. And Big Labor can’t have that. Much better to restructure under the guise of a government bailout where their paid-off Democrat buddies in Congress can help manipulate the proceedings to their benefit.
*The New York Times’ Room For Debate blog:
While many industry experts have long felt that the Detroit automakers were saddled with too many brands and too many models, lots of consumers have felt differently. Pontiac and Saturn have their loyalists. Why do brands still matter to consumers?
The Obama Administration is considering whether or not to continue helping the big auto companies stay afloat. We’ll have the plans shortly. But the headline very well may be that included in their plans for how they’ll get back to viability will be requests for more billions of taxpayer dollars. Do you think America should continue to prop up these companies? While you mull that over consider the counter argument — letting these companies go bankrupt will costs lots and lots of jobs, at a time when the economy is already on one knee.
Advocates of bailing out GM and Chrysler, and most likely Ford, say America can’t afford to lose “its” auto industry. But this argument leaves out the fact that foreign-owned automakers, already producing cars here in the United States, employ – directly or indirectly – hundreds of thousands of Americans. And at the rate the Big Three are shrinking, and plan to shrink even further — even if they get bailed out –foreign automakers may soon be employing more Americans than the Big Three.
Meanwhile, the Big Three themselves are global. A Pontiac G8 shipped by GM from Australia has less American content than a BMW X5 assembled in the United States. General Motors’ European subsidiaries include Opel and Saab; Ford’s include Volvo.
I’m not arguing against an auto bailout. But it ought to be focused on helping American auto workers rather than helping global auto companies headquartered in America. Why pay the Big Three billions of taxpayer dollars to stay afloat when, even after being bailed out, they cut tens of thousands of American jobs, slash wages, and shrink their American operations into small fractions of what they used to be?
Let them go bankrupt. We taxpayers are sick to death of paying for the mismanagement of the bankers and the automakers and the government. Let it crumble and once the devastation is over we can rebuild better, smarter, and stronger. Let the greedy reap what they’ve sown.
14 Responses to “General Motors Wants Deeper Federal Pockets (More Big Bucks)….”
I supported the auto bailout in December. I now think the government needs to do this: pass a law – or use TARP money – to establish debtor-in-possession financing to allow GM to go through Chapter 11 bankruptcy. The same could be done for Chrysler.
I agree that total liquidation is a bad idea and would have catastrophic effects over much of the country. But piecemeal bailouts won't work either.
Also note that the Japanese makers are in deep trouble too.
In addition the auto workers union refuses to negotiate knowing that the government is going to bail out GM.
I totally agree with the bankruptcy. Just like the airlines. Why do we have to bail them out when we didnt bail out any of the various airlines that went belly up.
But we wont. Barak Obama even made reference to unions today in his speech before the signing. He is indebted to the Autoworkers as is the Dems. They will spend 50 or 100 billion on Detroit before they let those unions lose jobs.
The unions will lose the jobs regardless. The UAW has been playing defense for decades. They are more concerned about retiree health care than they are about protecting jobs they know are doomed.
While of course its true that the Unions will lose jobs that is not the issue nor has it ever been the issue. Unions are used to layoffs. What they are trying to protect is their members for the times ahead when the automakers call back to work those that are laid off which they have ALWAYS done in the past.
The best thing that can happen for the industry is for one of the big 3 to file chapter 7. I think GM is in the worst shape and it will most likely be them. By removing their 13 million units of sales from the market place they will shore up the battered automotive industry and let the rest of the automakers become viable again.
Then the UAW can explain to the workers why their strategy was used to best effect.
In the trucking Industry. The teamsters voted to take a 10 percent pay cut to keep more workers working. Its too bad the UAW doesnt have similiar compassion for their fellow workers who may not have 40 or 50 years of seniority.
As I told others earlier, I don't believe in this case it's still a matter of the UAW and Detroit execs living in denial — that they believe there is no problem — or its shabby “companion,” that they not only define the auto industry here in the USA (they have not since the 1980s) but are some inherent part of the USA and thereby especially entitled to this or that kind of assistance, as if it's a birthright.
These days, it always was likely that Detroit was going to cynically seek a better deal from the Obama administration rather than make the best effort toward reform — Gettelfinger at the UAW even said that openly, if I recall — but more important, Detroit was going to exploit the current economic situation (and how it affects and involves the Obama administration as well as Congress) and appeal to emotion and to political consequences (as Detroit sees it) would the Detroit firms go bankrupt. (It's the “much costlier if we go bankrupt” stance.)
The UAW is making concessions, but we'll see eventually if they are true concessions, i.e., substantial, bringing the UAW in line with the modern auto industry centered in the southeastern USA (though it has plants in the Midwest, too, not to mention originally working in the Bay Area, at NUMMI). If they're just fluff, well, eventually, we should do as so many of us had rightly argued for ages already — let the firms go bankrupt. The UAW would then see its current membership's pensions put on the PBGC, and if the costs are too high we taxpayers will rightly insist that they, and all other PBGC beneficiaries, take a “pay cut” in the form of a benefit reduction. The PBGC already is hurting. (Nobody sane cares about what the UAW members thinks of the PBGC capped pension payments. They're lucky to get anything at all, and they should have learned and reformed ages ago after observing what happened with the steel industry and the steel workers.)
Bankruptcy was long overdue already, and after we got this news…despite the appeals to emotion and rationalization based on the consequences of unemployment, does it make sense to keep these companies alive, unless far-left-leaners want the companies to be nationalized?
“the automakers warned that any new money from the federal government would be much cheaper than the staggering cost of bankruptcies and forced liquidation of the two companies”
http://www.freep.com/article/20090218/BUSINESS0…
http://www.detnews.com/apps/pbcs.dll/article?AI…
http://www.freep.com/article/20090218/COL06/902…
[Reality?]
http://www.freep.com/article/20090218/COL14/902…
http://www.freep.com/article/20090218/OPINION01…
Here in Detroit I am reminded of when I lived in Washington with the obvious presence there of the federal government, throughout the federal district but also in the suburbs. There were plenty of people and there was plenty of activity outside the federal government, and here in Detroit, the auto industry is not the only presence, either. So far, the area is far from a wasteland and the roads, to name one kind of observation, are far from deserved, and people remain “lively” drivers — they are not exhibiting any demotivation (yet, at least) from what is happening. (I wonder to what extent retirees from Detroit automakers are still here, because this is a family-oriented location, and how the area would actually be affected by a bankruptcy. I don't believe people here are in denial, based on the many critical remarks on local radio about the Detroit companies and the UAW that match the level of defensiveness that is also expressed, but it might be different if a bankruptcy of the auto makers and the suppliers happened and retirees as well as current workers or their relatives were affected.)
An overall view of the situation:
http://www.businessweek.com/bwdaily/dnflash/con…
And activity in the shark tank:
http://www.thetruthaboutcars.com/chryslers-viab…
http://www.thetruthaboutcars.com/bailout-watch-…
http://www.thetruthaboutcars.com/uaw-reaches-te…
http://www.thetruthaboutcars.com/general-motors…
http://www.thetruthaboutcars.com/late-night-que…
There is no doubt in my mind that the democrats are mad with power and are using bad economic times to nationalize anything and everything that is in trouble.
The automotive industry is such an example. Once they have them under their thumb they can turn loose the green cannons and the Global warming lunatics and punish the automotive industry to the brink of extinction and there will be nothing that can be done.
By doing this it will turn the gasoline and oil companies unviable and then they can snatch them too.
Obama scares the hell out of me because it is so clear that the democrats want to socialize America and with the current economic climate I see it happening.
However that would not be horrible IF…….IF…….IF they were not doing it in a fascist manner which means they are trying to remove the GOP from being viable contenders for government control. 1930's germany anyone? Fighting 2 wars, socializing, grabbing power, trying to run the opposition out of town. Frightening indeed.
In reverse order:
“that the Japanese makers are in deep trouble too”
Yes, but that indicates the scope and depth of the slump. It does not negate, and never has, the fact that the Detroit-UAW model is decades obsolete. The economic slump is a separate issue — “_even_ the modern auto makers in the USA like Toyota are hurting.”
* * *
“pass a law – or use TARP money – to establish debtor-in-possession financing to allow GM to go through Chapter 11 bankruptcy”
This has been on the minds of some in Washington who see that the doomed Detroit model cannot continue. It's a waste of our money but having federal money and oversight ease the fall of the companies has been seen as one alternative to Chapter 11 (long overdue), and it appeals to a number of people who fear that Chapter 11 would lead to Chapter 7 quickly. This is like the old US steel industry.
I don't want to see any excess, including federal money for warranty support (something floated by some as an example adjunctive step the feds can take, along with, say, dealer closure-ease payoffs).
Hopefully nobody there will want the companies nationalized or made into the Penn Central with the bloat and ridiculousness that we have seen for three generations or more with the federal government meddling in the railroads, with this US industry. (The steel industry and the airline industry are the models — actually no federal intervention is needed or merited.) We don't want to see, in addition to “railroad retirement” when browing through federal income tax and other information, “auto industry retirement,” etc., nonsense (much less an American Leyland). A federally managed bankruptcy is bad enough. Detroit's acts among normal people (so many taxpayers) are leading us to reconsider if we thought Chapter 11 bankruptcy was long overdue. Perhaps we need to go directly to Chapter 7 now.
Now is the time to buy. Or so everyone says.
I went to the Saturn dealer to see about updating my Saturn Vue to a new Saturn Hybrid.
Fine Ill give you 8000 dollars for you old vue and we will get 4700 dollars in customer cash.
That all sounded fine except I owed 10,500 on my Old vue and so a car that was 29000 dollars with 4700 dollars back and paying off my old car I was being asked to finance 29000 dollars.
In addition at zero percent financing for 60 months they showed me a payment of 503 a month. Which translated to 30,180 for a 29,335 car.
So in summary they were going to be paid 30,100 +4700 cash back or 34800 for a 29,335 car. In addition they were going to pay 2500 out of their pocket to pay off my car by offering 8000 dollars instead of the nada value of 10,125.
In essence I was going to pay 37,300 dollars for a 29,335 car that was being offered at zero percent financing.
Creative and another classic example of why Automakers are hurting.
“the democrats want to socialize America and with the current economic climate I see it happening”
I'd view it more as a rush to spend and buy votes more than meddle, though the meddlers will come to the forefront later (more than they already are evident). These Dems aren't dysfunctional in the way the GOP is, but they are still faltering in that they seem to not know what exactly they want to do, they are not coherent, they have factions working at cross purposes, they are showing their nature as a menagerie of various special interests, whose competition with each other will rise to the fore. At times it has already been clumsy, as we saw with the surprisingly ridiculous extent to which the House Dems rushed to seek spending for things outside the scope of “stimulus” measures, and with the mush we ended up seeing sought by the Senate. Will we see more? Yes. The nuttier environmentalists will be emerging, not only with energy policy,
http://blogs.wsj.com/environmentalcapital/2009/…
but with the Detroit automakers, the subject of this thread. Consider not only the dinosaur-idiocy bailout-zombie behavior, but the wackier environmental and play-tech stuff uttered by Dems, especially in the House. If the Dems would co-ordinate their efforts, couldn't you see a scenario in which the Detroit companies were effectively nationalized and made into a producer of politically correct products and into a play-pen for experiments by the environmentalists, at the public's expense? It certainly is feasible were the Dems to acquire intelligence and discipline. We could see insistence by meddlers on progress on rapidly developed, magical electric vehicles and other clean, green automotive tech and unrealistic emissions and efficiency standards (rather than work on battery tech and on electric vehicle charging infrastructure and improvements), the kinds of things that Pelosi, Waxman, etc., in California demand and threaten routinely, as well as lunacy like arbitrary “alternative energy” (i.e., wind, with solar as a magic companion) minimum requirements in electrical utility generating capacity, and so on. Be thankful that too many fools are preoccupied with simply buying votes and spending money, and only occasionally so far exercising power improperly — they are too currently working (so prematurely and chilidishly and stupidly!) to rush to reward special interests and be self-centered that they are not yet really co-ordinating themselves. That's when we really stand to suffer.
Nationalization of the banks just got a boost — the Genius who was disparaged prior to the 2008 elections has become the Genius again.
http://online.wsj.com/public/resources/document…
“Now is the time to buy. Or so everyone says.”
The deflationary mindset and strategy (I am *** EARLY *** in referring to this, but it is appropriate already) says to wait for lower prices.
Reality concerning the current situation says things should be more of a buyer's market later, if not involving a deflationary mindset and situation (or “spiral”). In the case of Detroit, they still don't know what they are doing and it pays to wait for resolution of what they and the feds will do. (Others worry about warranty or parts, but I wouldn't base a large fear on that; the parts makers and aftermarket can logically supply most people's post-purchase needs.)
Plus, buying requires the money as well as the willingness to spend it.
There is no doubt in my mind that the democrats are mad with power and are using bad economic times to nationalize anything and everything that is in trouble.
LOL This isn't a Leftist agenda like the UK or Canada in the 1970's. They is a chorus on both sides talking about a temporary nationalization of insolvent banks, not all banks healthy and insolvent.
Godwin's Rule: No points for greenschemes. Pay more historical attention. That “Germany in the 1930's” was in response to widespread economic dislocation where the previous administration was inept and …. Uh oh.
Anyhoo, the fact that there is no doubt in greenschemes' mind comes as no surprise. There is no doubt in my mind that House Republicans are mad, with side orders of delusional and crazy.
“1930's germany anyone? A powerful, Charismatic Leader who instills the desire to follow him.”
We had our own 1930s, complete with gross initial overreach and the NRA (with its “fascist bird” mascot), but we were lucky compared to Germany (and other countries, which had been experiencing equal or worse strife since industrialization and had a longer record of civil strife, _plus_ it was _their_ land rather than ours that was wiped out by the war, and subjected to a greater shattering of an Old Order and way of life).
I'd say this is the contemporary version of post-modern teevee stuff. Obama is a cute celeb phenom in this regard, with smiles and sound bites, and inflated not by himself and his staff but by his admirers (including those in the media) who make the 1930s and FDR references (just as during the campaign they made JFK and Martin Luther King references). Think “American Idol” rather than “leader,” even among the many in this country who have taken the 1930s and 1960s lessons to heart and view him and Washington as parent.
* * *
In the meantime, the situation with the Detroit companies continues to develop, and the group not often thought about is moving its muscles again — the dealers. (Think “state franchise laws.”)
http://money.cnn.com/news/newsfeeds/articles/dj…
http://www.jerrykopel.com/2009/car-franchise-la…