Well, I guess most folks don't really care to much if the US auto companies fold, judging by the internet postings. If one or more does fold, who has the capital in the US right now buy up any of the assets? The cost of admission for new vehicle design is very high.
Consider the crash, emission control and fuel economy regs that have to be met. Some US auto startups have made it for a few years, but none have ever been sustainable. Will Tesla Motors break the mold? It would seem that perhaps a Chinese or other foreign company may want some of the assets, but maybe not. Meanwhile a huge loss of jobs in the US, for steel, semiconductor, plastics, software etc etc. I doubt many US consumers realize how many of their own jobs could be affected by supply chain fallout.
One last consideration, during WII, many auto plants and suppliers were leaned on to mass produce items needed for the war effort. With one of our last major manufacturing industries potentially going belly up, what does that say about our emergency manufacturing capabilities in the USA?
Seems like a $35Bn loan to the car companies would be a better investment than AIG etc, especially if the unions provide some concessions to help. We don't have much history to go on other than Chrysler's loan in the K car era, which they paid back with interest. Will the Banks pay back their $700Bn in loans any time soon?
The cost of admission for new vehicle design is very high.
The remaining manufacturers will pick up the slack. They will all be hiring.
Ok but they want 60Bn not 35. A month ago the wanted 25Bn. Did they really not know what it would take? Are they that stupid? And they want money? LMAO Good riddance.............
Oh the UAW is going to provide a lot of help if they expect to get a bailout. Retirees, dust off your resume, that retiring at 48 deal is over. 30 years and out, worked when there was no competition. That cabin up north you drive your SUV up to is going to be a thing of the past. Us locals are going to like our part of the state w/o you looking down your nose at us that work for a living inside the constraints of market reality. We will not miss you.
That is the Republican and Redneck Agenda.
Oh the front office is going to get their pay and bonuses cut hard. Be glad you have a job and be sure you are doing something that is essential. White collar is a target since we all know they make too much for what they do. The brightest amongst the staff will run off and do something else further contributing to Detroit's decline.
That is the Democratic Agenda.
Hope they don't force out the bright guys and gals with talent that go in another direction working for their selves.
Until labor and management get a dose of reality, the former big three are doomed. And likely they are going to take my employer with them. I hope against hope there are sane leaders exist in both the front office and the UAW.
They wouldn't be begging for money if they had a choice Wes and you and I have always been on the same page. We just disagree on which one we ought to turn to next. LOL
I could deal with alladat (barely), iffin they put management in public housing, made them ride bicycles in winter, and made *them* work 30 years, with a minimal pension, and half-assed health care, and half-assed public schools for their silver-spooned urchins.
Seems, tho, that chevy might could pull it out/off iffin they got dat Volt going. I'd be first on line for that one, even tho I'd rather buy the equiv from someone who deserves it.
Inything to f*ck Big Oil. And over here, electric cars would do just that, as I think most of NYS's power is hydroelectric.
They need to go bankrupt and reorganize. There will still be a US auto industry and it will be more competitive than ever without the UAW millstone around its neck.
I think everyone does care, the problem is that it is by no means clear that dumping tens of billions into the car companies will do more than buy a few weeks to a few months of existence.
Why would anyone want to buy into this mess? Much of the problem is that many of the "assets" are grossly overvalued, obsolescent, located in high tax areas, located in high labor cost areas with a "history," located in the wrong locations for the current traffic patterns, etc.
While the US job fall-out could be substantial, the impact will be greater on the import suppliers of the higher valued components such as electronics, engines, transmissions, etc.
We are all screwed, glued and tattooed!!!
Unfortunately this is *NOT* strictly an automotive related problem, but is the result of a generation of de-industrialization under NAFTA and other "trade" pacts. In many cases the US "manufacturing" organizations are now shells, packing and shipping products [or assembling major high value components/sub-assemblies] manufactured off-shore. In too many cases the only thing made in USA is the label and the box.
Currently the US would be unable to supply even uniforms and boots for a major military build-up from domestic sources.
----------- If this was a liquidity/cash-flow problem, possibly.
Unfortunately the primary problem is one of solvency, i.e. the companies/individuals involved are "busted," and the "liquidity" problem is only a major symptom of this.
Based on independent outside evaluation, the 25/34 billion to "save" the domestic automotive industry is a low-ball down payment. I don't have the link, but just saw one estimate about
5X this amount [150-175 billion] by an independent economist/accountant, and even this huge "investment" does *NOT* guarantee survival, only the continued existence of the domestic auto industry into the start of the next up cycle.
The continued existence of domestically owned/controlled automotive production at this point [start of the next up cycle] will depend on product design [looking good is far from enough]; build quality, durability/maintainability, value for money, and response to customer requirements such as fuel economy. This is far from assured.
FWIW -- it is doubtful that any non-subsidized organization could exist with the excessive blue collar, white collar, and management labor costs/benies/perks, exhibited by the "big three," in comparison to the equivalent positions in the rest of the economy. Indeed, even with the inflated blue collar wages, the management wage multiplier is still many times that of the transplants, so while the UAW may have been better negotiators than the companies, they are not *THE* cause of the problem.
Unka' George [George McDuffee]
------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
GM is gone by any rational standard. The currently have
*NEGATIVE* 58 billion stockholder equity.
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A major "plank" in the GM "recovery" plan is getting their unsecured bond holders to swap 32 billion in debt for equity [stock]. see page 11
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The current market cap for the GMC is 2.5 billion, so the proposed debt for equity swap is about 13X current market cap. [Dream on -- I am surprised they didn't ask Wagner to pee in a bottle to see what he is on -- must be some really bad stuff]
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Ford appears to have a real chance of survival, possibly with taxpayer loan guarantees, and Chrysler *MAY* have a chance as a niche player [minivans] and contract producer for VW, *IF* they can pick up some of the GM business, and with considerable help from the taxpayers.
Unka' George [George McDuffee]
------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
Most of the industry experts I've heard over the past few days say there will be no receivership and no reorganization. People don't buy cars from bankrupt manufacturers. (Studebaker is an example; once it became known they were thinking about getting out of the car business, they were.) They'll go straight to liquidation, possibly with a few months of receivership in order to handle the selloffs. The brands have very little goodwill equity so most of the remaining value will be real estate and hardware.
The Chinese are already sniffing around, looking for possible bargains.
Found some links, it was Mark Zandi of Moody's [and it was "only"
125 billion not 150-175 billion -- my bad]
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Unka' George [George McDuffee]
------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
----------- One of the best was Hudson. At one time a real power on the stock car circuit dominating NASCAR in the early 50s. Had several innovations such as the "step-down" design that were widely copied.
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also see
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Unka' George [George McDuffee]
------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
That's a good summary of a legitimate point of view. I don't know if it's right (nobody really does, I think), but it's good sense.
I think that most of the people who object to a bailout are frustrated. They aren't in a mood to be pragmatically analytical. It *is* frustrating. It is tempting to say "I'll take a hit myself, rather than bail those bastards out." And the bastards are the UAW, car company management, and the rest of the voodoo dolls they keep in the dark places they store their resentments.
It's hard to keep one's head while something like this is going on, and I think it's pressing Congress and the rest of the government really hard, trying to rise above the politics and to focus on what's good for the country. IMO, they've looked pretty good on stage, expressing their own frustrations fairly openly while trying to come to a sensible resolution.
But that's no assurance they'll stick to it. There are some easy outs, and there are plenty of other people to blame. My fear is that they may wind up doing nothing because they don't want to wrestle with all of the conflicts and the political risks, and doing nothing looks like it could establish a new equilibrium for our economy, in which shining each other's shoes looks like economic growth.
Are you sure? A sell off of the Big Three would result in so much displacement that car sales for the whole country are likely to tank, IMO. The multiplier effect throughout the economy will cause many more to be laid off or fired. And then there will be no reason to hire most of the fired workers, because nobody's buying.
Welcome to the new equilibrium. Would you like to buy one of my apples?
------------- The problem is that no one knows, even if we turn the taxpayer money tap full on, if "Detroit" *CAN* survive as a commercially viable operation.
Of course with enough taxpayer subsidy per car, say 20 or 30 thousand $US per vehicle, Detroit can "survive," but then the question becomes "can the US economy survive?"
We would do well to remember that the US taxpayers are *ALREADY* supplying considerable subsidies for Detroit by picking up their retiree medical costs through Medicare, and at the state level, very considerable tax abatements on real estate, buildings, machinery, inventory, etc. and even direct funding through Economic Development Grants, OJ training, etc.
The automotive transplants, because they are making a profit, are paying a reasonable share of the cost of running the government at various levels through their *INCOME* taxes, while "Detroit," because they are producing cars at a loss, are not paying any income tax, and indeed are generating large carry forward tax losses which will offset future income tax payments (assuming they ever earn any income).
Given that any business operated at a loss is a drain on the macro/aggregate economy, just how long should major, for-profit corporation be allowed to operate at a loss before they are forced into chapter 11 or even chapter 7? The only thing that GM appears to have accomplished over the last 10 years is to dig the hole deeper, deeper, deeper, deeper? which the US taxpayers are now being asked to back-fill with 100$ bills.
Unka' George [George McDuffee]
------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
If you have highspeed internet you may find these videos of interest if you are following the Detroit soap opera. Senate Banking Hearing: Panel 1
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Banking Hearing: Panel 2
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Conference: Sen. Chris Dodd (D-CT)
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see
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table of detroit political contributions
you can see the Detroit proposals here
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Its your money..... Unka' George [George McDuffee]
------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
I don't think that's the key question. The question, IMO, is whether our economy can take a hit that large right now, amidst all the other economic problems, without sinking into a full-blown depression. It's a question with two possible answers, one of which is a risk we can't afford to take.
A reasonable guess is that a delayed unraveling would be a lot better than a quick dip in a bath of acid. A cost of $100 billion, which is on the order of 1% of our GDP, would look like a missed bargain if the alternative turned out to be a large, persistent, and intractable level of unemployment.
And there's always a chance that the Big Three, or the Big Two, could recover. I don't give that much probability but, again, the alternative is a lot uglier than sinking one or two percent of GDP into giving it a try.
Right now, it doesn't matter. Detroit's long-term viability is a question for some leisure time when the recession is over.
You can argue management decisions when we can put our feet up. Right now, we're trying to keep our feet out of wet concrete.
George, we already know we're about to sink hundreds of billions into infrastructure projects, which will be inefficient because there's no market discipline to control them, but which most agree is a hell of a lot more productive than having people sit on their butts and collect unemployment while we wait for the cycle to bottom out and recover. Providing make-work for Detroit by having people build cars, even if the car makers can't restore competitiveness and profitability, is better than ripping the heart out of the upper Midwest and counting the bodies that bleed out and die.
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