naked capitalism

baychev says:

the US manufactures vehicles profitably: hondas, toyotas, bmws, mercedeses, nissans. but all those companies run their business for profit and do not expect government bailout. in contrast gm, ford, and chrysler expect a repeat of the chrysler bailout. if it happened once, it should happen as many times as it needs to.
i think it would be easier for each of them to buy a small bank or convert to bank holding company than expect separate bailout plan for them.

Fred says:

Has anyone thought about the collateral damage to saving GM?

How many companies are not going to have access to capital because GM will suck the oxygen out of the capital market? Money misdirected to save GM jobs won’t be available to save jobs at better run companies.

Anonymous says:

oh come on everyone
this country cant give a hail mary pass for the little amount of 25 billion– to see if they can fly
YET we give banks and gambling companies( also known as investment banks ) trillions??
this seems unreal– so what is a few billion for people who will actually get the money- blue collar workers VS RICH BANKERS???

this who arguement is to try to break up unions– little else

Anonymous says:

It is important to distinguish between the prospects of the three automakers separately. Chrysler was in deep trouble even before 2008 which says a lot about their prospects. Despite insurers withdrawing supplier credit insurance for both GM and Ford, the rumour is that major suppliers are still delivering to Ford but not to GM. This probably reflects the relative sales performances of the companies with Ford sales down some 30 percent while GM sales are down a lot more.
There is a rather interesting development with GM plants in Germany going to the German government almost as a separate European entity for a bailout. Rumours are GM Europe may be bailed out on the condition that no capital is sent to the US parent. GM Europe up until the last quarter has been making a reasonable profit and the bailout is thought to combat the stance that supplier credit insurers have taken. There then becomes a risk that GM Europe will compete with GM US.
There is also no news on the profitable Australian arm of GM which you might expect to go its separate ways. This leaves the question of how bad the US operations really are and will they turn out to be another bottomless pit like AIG. Any bailout will also be seen as protectionism if share holders and current management are not wiped out. Any trade wars are likely to cause even more widespread damage, so the governments hands may well be tied, by foreign expectations.

Anonymous says:

@doc Holiday
glad I'm not the only one peeved at the GAAP problem, I have been since Reagan.

The automakers had a chance, when California made them go for fuel efficacy, but as soon as the the time limit was up, recalled all of their electric cars, only to have Toyota which out of fear of being left behind, started off their own R&D project, with out Government support. who's laughing now. Bo ho for US auto industry.

I bring up my pet social license issue, in regard to their whining. They for so long, FEEL that the American people were in their pocket, a part of the American Aesthetic like Baseball or Apple pie and could churn out POS cars that ate more gas than the ones I drove in the 70s. I say sell off the parts and set up, the over payed workers to get a new life and the rest to the creditors. Time for some new blood to reinvent the American auto industry. Anyone thinking of giving me a hard time on the statement of "over payed auto workers". Please explain how anyone holding a air powered rattle gun to screw down the same 5 bolts all day is worth more than $20 an hour not $75 and I'm being nice with the 20 bucks.

@anon,
GM or Holden as its called here has the big thumbs up from PM Kevin Rudd, he just did a news conference today. The Government and Holden are going to work together to start the a Green car business for Austrian market and hopefully export. Kyoto was a big part of his election campaign. To sign it.

@river
Hope Obama doesn't get all romantic/nostalgic/good old days on us. We need a new plan.
Hope I didn't waste my vote on a sentimentalist. We've had 8 years of that all ready.

Skippy

Stephen says:

eh,

they dont want their money, they want their vote or support, the money is from all taxpayers at the coercive hands of the government through taxation.

Moving on, if I were sitting in the boardroom watching and listening to that presentation I would say….so where is the rest of the presentation.

They just described the environment and that they are important, but those are ridiculous reasons to lend or invest. The dealership angle is stupid, sorry but saving dealers should absolutely NOT be part of the deal, dealers pop up and collapse like cards, they arent strategucally important to anyone….minding what effects a dealer collapse would have is another matter, in terms of short term price etc. But spending one dime on dealers is a wasted dime.

The critical aspects are manufacturers, design and supply chain leading up to manufacture. There are important elements in there that one should think twice about before letting it be ruined beyond repair.

What was missing from the presentation is, what will the loans enable, whats the workout plan, what are the milestones what does the industry look like after the money is given. I have no objection to assisting the industry to transition, but I want to know what they are planning on transitioning to, and when.

GM needs to go into pre set chapter 11, as does chrysler. COmbine the two under bankruptcy protection. Ford is healthier and should not be disadvantaged unecessarily if it could avoid bankruptcy. But before a cheque is cut it needs to be clear on for what, a detailed plan is required.

For those who say the government should be invilved need to ask the question of how much was caused by government, government incentives to build trucks (taxes that allowed SUV’s to be classed as cars). Government fuel standards, that didnt really acheive what they intended, the implicit support of unionization and support for some of the outsized demands, aprticularly on health benefits, the failure to force the car companies to recognize their true costs of health benefits (especially during good times when the transition could have been less painful). Government has been part of this and auto industry management at various times has been fat, happy and stupid….why shareholders never punished them I will never know.

Summary: Presentation has only set out background and environment, no plan presented, inclusion of spurious elements like dealers, and no discussion of end state, transition state or goal. I hate to think how much they spent on that.

tom a taxpayer says:

I make the dice that hang from the rear view mirrors in cars. Can I qualify for the auto-parts bailout?

mft says:

@river mentioned the quote ‘The American Way Of Life Is Not Negotiable’ – this was actually first said by Presídent George H.W. Bush in 1992 at the Rio Earth Summit. It is in fact the defining global political statement for the historical period since the collapse of the Soviet Union. The situation of the Big 3 in Detroit is just a tiny part of the global catastrophe which is unfolding before out eyes as a result of the program based on this statement.

The glossy cover picture for this program was “globalization” – internationally owned corporations operating globally in both marketing and production. The commercial that Yves has posted reveals the small print. Apparently the Detroit automakers are “domestic automakers” , the others (with factories in the southern states) are foreign. No matter that there are American shareholders in both, the workers are American, the buyers are American. You see, “globalization” was just a fairy tale that was sold to unsuspecting foreigners, the real name of the game is “what’s yours is mine and what’s mine is my own”, where for “me” and “mine” and “my” write USA.

Soon the truth will be out. Then it will be up to the USA with its military might, greater than the rest of the world put together, to show: are you going to beat us into accepting your “American way of life” or are you going to accept that you are one of us, maybe still for a while first among equals, but none the less no more than equal.

As for Obama: a presidency is made above all by power and events, not by the campaign rhetoric that went before.

vlade says:

Not that I was following this closely, but isn’t one of the problems of US car industry that the companies are effectively pension/health insurance companies with most of the assets invested in not-that-well-performing car manufacturer?

IIRC, at one of them (GM?) about 2k of each car sold were to pay for pensions and health insurance (I could have the number wrong, it was really a long time I saw this).

Anonymous says:

The film asks over and over again, “what happens if we allow the auto industry to collapse?”. The auto industry has already collapsed–past tense. The question now is how to best effect a recovery. Should we throw good money after bad to management that has proven over many decades that they can’t turn money into value?

Bankruptcy is the best way to clean house and get the industry moving forward again.

Will says:

the terrorists win!

Lee says:

The way the big three present their argument in this video only further confirms their arrogance. Every figure quoted was in terms of the auto industry, as if they were all of it. Despite their wistful memories of the past, Ford, GM, and Chrysler are no longer the auto industry. They propose that if they were to collapse then nobody else could step into their place. As if no other companies are capable of building cars, that their vendors cannot sell to someone else, and that all those threatened jobs exist solely on the (formerly) big three’s behalf. No doubt the rest of the industry, and the nation, will throw up it’s arms in hopelessness because only GM can build tanks.

Anonymous says:

I would like to know what prices GM, Ford and Chrysler would need to charge so they do make a profit?????I should probably go and buy a bike…..

Anonymous says:

People – wake up. All those foreign manufacturers are subsidized by their home country governments. For example, U.S. manufacturers operate with the burden of $1500 per vehicle in health care costs that the foreign competition does not bear. (There are other forms of subsidies as well.)

You can also see this in Canada where the Big-3 operate many plants – many more than most U.S. citizens realize. Why is this? Because the Canadian government provides health care for all citizens. The Big-3 doesn’t have to pick up that bill over there.

And for those that think the Big-3 are not competitive: Check out the recent product offerings. Also check the J.D. Power Quality ratings. GM has received the “Car of the Year” award several times in the last few years.

And then there is the strategic military concern: Detroit was the “Arsenal of Democracy” during WWII. Be very wary of losing our ability to manufacture military equipment.

And in general, manufacturing is the keystone to successful, productive societies. Now many understand that Banking and Finance is an industry of smoke and mirrors characterized by delusion and trickery. Not so for tangible goods that come from a manufacturing capability. It’s the manufacturing jobs that created the middle class in America – which defines our prosperity.

We have much at stake here.

DG says:

Why does everyone assume letting Detroit fail implies the end of GM, Ford and Chrysler? They will still be around, in one form or another. While the downfall will be painful, it will collectively be less painful than feeding zombie corporations for decades (granted I believe the big three have been zombies since the 80’s via their lobbying efforts). The industry needs a cathartic event to reduce its debt burden, flush its current stagnant culture and bring forth innovation through new investors.

Anonymous says:

I have a question……

Do Honda and Toyota need a bailout?

Answer: NO!!!!

Next question…….

Why don’t they need a bailout?

Answer: Because they have been handing GM, Ford, and Chrysler their collective A$$ for the last 20 years!

Honda and Toyota have been focused on QUALITY and FUEL EFFICIENCY for decades.

I’ve been totally dumbfounded at the product line that the Big 3 have been producing for the last 10 years. Only until the gas pump was held to their head did they make ANY changes.

I say let them go into bankruptcy…..scale down their operations….make the necessary product changes.

This notion that the auto industry is going to disappear is utter nonsense. Yes, lots of jobs are going to be lost, but that MUST happen no matter what.

john bougearel says:

We should consider the potential innovation that can be unlocked or unleashed (would be a better word) without GM in its present form and in its present management preserving its staid form.

Ultimately, this unleashed potential would spur new production and employment, and we will all be better off.

@ anon 7:37 – there was far more outrage expressed here and everywhere about bailing out the banks. Most every poster here is far more empathetic to the plight of the auto industry. For the banksters, they deserve the heel of our boots and not the wallets our kleptocratic lawmakers saw fit to rent from us

Let’s pay our dutiful respects to the engines of growth in the last century today and wake up to a new dawn in the morning.

cent21 says:

anon, you might not have noticed, but I think most of the posters on this blog consider the $trillion bailout of the banks poorly conceived.

I was surprised to see this week’s Barron’s cover put together a plan that would have drawn ridicule from the conservative press just a few months ago. Jim McTague wrote up the article as a consensus of Barrons staffers, starting with $100 Billion of Stimulus, 2nd, support aid for Ford, GM, 3rd, help homeowners in exchange for a share of future profits (capital gains taxes, perhaps?), etc, etc.

Barrons didn’t even have the usual TG Donlan counterpoint on the back flap (last week, Donlan’s editorial was “Free to Fail”, featuring the Corvair).

This is rather on the scale of the Tsunami that hit Thailand a few years ago.

Personally, I think a lot of the fallout in the “real” economy can be attributed to the President and Mr. Paulson’s hysterical take on the state of the world. Thought I guess the financial plumbing actually was in pretty bad shape before they came around that view.

If the US auto industry hadn’t blocked higher fuel efficiency standards for the past couple decades, but instead had embraced them, they’d be relevant, and the USA and the world would would be a lot more secure.

I don’t know how Obama might find a way to resurrect the US auto industry. Perhaps like the case with Nixon going to China, Obama might pull off some miraculous deal.

If Obama had the big time gambling instincts of Bush, he’d create an emergency in which the only way to avoid a depression was by going to single payer health care. Might be correct if that leads to a reform of the US auto industry, and might be achieved if he doesn’t blink.