Bailing out the Detroit automakers

[jimotis4heisman]

GM Seeks $16.6 Billion More in U.S. Aid - WSJ.com

General Motors Corp. and Chrysler LLC told the federal government they may need up to $21.6 billion more combined in bailout loans to put them on the road to recovery, and outlined extensive bankruptcy contingency plans even while continuing to lobby against the option.
The recovery plans submitted to the U.S. Treasury would cement GM's fall from the top of the global auto industry to a smaller, more flexible car company relying less on its core U.S. market for sales. Chrysler, meanwhile, appears to be steering itself toward being the North American arm of Fiat SpA.
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.
Getty Images General Motors Chairman Rick Wagoner speaks at a press conference at the company's world headquarters Feb. 17, 2009, in Detroit, Mich.



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 submission of the recovery plans was required under terms of the U.S. loans the auto makers received in early January.

...
So far, GM has received $13.4 billion in U.S. loans; its plan said the company needs a total of $30 billion in aid, or $16.6 billion more than it has now. GM also said it needs at least $7.7 billion in loans from the Department of Energy to develop fuel-efficient technology.
Chrysler has received $4 billion in loans and said it needs $5 billion more.

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[Ttown]

The faucet of money has been turned on and the handle is broken.
How soon will we all be eating beans and frijolis. ?

[BuckeyeMike80]

Originally Posted by BucyrusBuckeye

The faucet of money has been turned on and the handle is broken.
How soon will we all be eating beans and frijolis. ?

I can't wait until a loaf of bread costs $23,000.....

Weimar America here we come....

[MaxBuck]

Originally Posted by BuckeyeMike80

I can't wait until a loaf of bread costs $23,000.....

Weimar America here we come....

Right now the fear relates more to deflation than to inflation, so I really don't think that one is in the cards.

With that being said, I really don't think bankruptcy would be a bad option for these two bloated, outdated dinosaurs. Might give them a fighting chance to get out from under all the pension and union contract obligations that now hamstring them. Of course, I'm neither a GM pensioner nor a creditor, so it's easy for me to say ...

[jimotis4heisman]

Originally Posted by MaxBuck

Right now the fear relates more to deflation than to inflation, so I really don't think that one is in the cards.

you dont think well see long term inflation over all of these bailouts/programs?

[MaxBuck]

Originally Posted by jimotis4heisman

you dont think well see long term inflation over all of these bailouts/programs?

Too early to tell IMO. Of course it's possible.

[Muck]

Originally Posted by MaxBuck

Right now the fear relates more to deflation than to inflation, so I really don't think that one is in the cards.

With that being said, I really don't think bankruptcy would be a bad option for these two bloated, outdated dinosaurs. Might give them a fighting chance to get out from under all the pension and union contract obligations that now hamstring them.

Amen.

[jimotis4heisman]

Originally Posted by Muck

Amen.

gm says if they go bankrupt the feds will need to give them 100b to do it. then of course the fed will be on the hook for the outstanding gm pensions. wont be cheap.... or they could just failures fail...

[Muck]

Originally Posted by jimotis4heisman

gm says if they go bankrupt the feds will need to give them 100b to do it. then of course the fed will be on the hook for the outstanding gm pensions. wont be cheap.... or they could just failures fail...

The $100b was a flier in the absolute worst case scenario estimates, GM only threw it out there as a bit of a scare tactic IMO. The low end estimate was $36b.

I just feel that a Chapter 11 filing provides more of an opportunity for GM to fix the problems that got it here in the first place. That is preferable to me than going through this whole thing again in a decade or two.

It's hard for me to feel a whole lot of pity for a company that had close to $50b in liquid assets when it first went to Capitol Hill with hat in hand.

[fourteenandoh]

Holy cow, GM needs more money!? I never would have seen that coming...

['BusNative]

Originally Posted by BucyrusBuckeye

How soon will we all be eating beans and frijolis. ?

Thats not a very diversified meal

[jimotis4heisman]

Paul Ingrassia Says Taxpayers Shouldn't Have to Subsidize GM's Deal With the UAW - WSJ.com

GM's new restructuring plan seeks another $16.6 billion in government aid -- for now. Chrysler wants an additional $5 billion. The $30 billion that GM has either received or requested since December doesn't count the $8 billion it wants to develop fuel-efficient cars, and another $6 billion it's soliciting from foreign governments.
For these taxpayer subsidies, the government could buy hundreds of thousands of GM cars a month and give them to deserving citizens. Make mine a Corvette, please.
Martin Kozlowski


Before deciding what to do with Detroit's demands, uh, requests, government officials first need to confront a fundamental question: How could so many smart people produce such a disastrous result? Make no mistake, there have been many bright minds in the American auto industry over the years -- at the auto makers, the United Auto Workers union, and the components companies. Most of them saw today's troubles coming for years, even decades.
"I frankly don't see how we're going to meet the foreign competition," said Henry Ford II, then chairman and CEO of Ford Motor Co., on May 13, 1971, right after the annual shareholders' meeting. "We've only seen the beginning," he predicted. Regarding American's increasing preference for small cars, Henry II declared: "Mini car, mini profits."
That was a couple years before Detroit agreed to let auto workers retire with full pension and benefits after 30 years on the job, regardless of their age. In practice, that meant a worker could start at age 18, retire at 48, and spend more years collecting a pension and free health care than he or she actually spent working. It wasn't long before even union officials realized they had created a monster.


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[Muck]

[gbearbuck]

Originally Posted by jimotis4heisman

gm says if they go bankrupt the feds will need to give them 100b to do it. then of course the fed will be on the hook for the outstanding gm pensions. wont be cheap.... or they could just failures fail...

The PBGC would have to cover the pension (of course they "only" cover a large portion, not the entire pension). The Federal Gov. would need to step in and help the PBGC as GM's pension would put way too much stress on the Corp.

All this printing of money will cause massive inflation down the road... no question, anybody that thinks different needs to go back to school and take a few 101 type classes...

IMO the big three need to restructure (Ford is in better shape... but still will not make it without help/restructure)... we have a process for that.

IMO this is text book as to how unions can/will destroy a company. Overpay on compensation and benefits and you will put your compnay at a disadvantage... over time the company will fail if the disadvantage is high enough. Period...

[MaxBuck]

Originally Posted by gbearbuck

IMO this is text book as to how unions can/will destroy a company. Overpay on compensation and benefits and you will put your compnay at a disadvantage... over time the company will fail if the disadvantage is high enough. Period...

This is certainly one point of view. And though I'm no fan of unions, there's another point of view, that being that the companies agreed to those compensation and benefit terms. If you argue that the unions coerced management, I'd agree, but it's clear that management similarly coerced its labor for time immemorial.

I guess I am saying this not to take unions off the hook, but rather to share the blame with management. God knows there's plenty of blame to go around.