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Leaders of Congress Now Beseech Treasury to Assist GM, Ford, and Chrysler

November 9th, 2008 | Posted in: Financial, Politics

In the latest step in the sorrowful saga that might just be the endgame for GM, Ford, and Chrysler, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid sent a letter to Treasury Secretary Henry Paulson.

This letter was sent Saturday on the heels on the meeting they had with the CEOs of the three automakers and a day after GM announced its death knell earnings release.

It essentially asks Paulson to allow direct aid to the automakers to come from the $700 billion Wall Street Bailout package.

Here is the full text of the letter:

Dear Secretary Paulson:

We are writing to request that you review the feasibility of invoking the authority Congress provided you under the Emergency Economic Stabilization Act of 2008 (EESA) for the purpose of providing temporary assistance to the automobile industry during the current financial crisis. Under EESA, Congress granted you broad discretion to purchase, or make commitments to purchase, financial instruments you determine necessary to restore financial market stability. A healthy automobile manufacturing sector is essential to the restoration of financial market stability, the overall health of our economy, and the livelihood of the automobile sector’s workforce.

The economic downturn and the crisis in our financial markets further imperiled our domestic automobile industry and its workforce. On Thursday, we separately met with the leaders of the automobile industry, and its top union representative, to discuss the financial challenges confronting the industry and its workforce, and possible actions to address these challenges. We left the meetings convinced that our nation’s automobile industry – the heart of our manufacturing sector – and the jobs of tens of thousands of American workers are at risk. Friday’s news of the automobile industry’s record low sales figures only reaffirm the need for urgent action.

Were you to determine that the automobile industry is eligible for assistance under EESA, we would urge you to impose strong conditions on such assistance in order to protect taxpayers and maximize the potential for the industry’s recovery. An automobile industry that is forward-looking and focused on ingenuity, competitiveness, and the creation of green jobs for the future is essential to its long-term viability. Other taxpayer protections should mirror those required of financial institutions currently participating in the Troubled Assets Relief Program (TARP), such as limits on executive compensation and equity stakes to provide taxpayers a return on their investment upon the industry’s recovery. Any assistance to the automobile industry should reflect the principles contained in EESA that guard against the need to recoup costs to the taxpayers.

We must safeguard the interests of American taxpayers, protect the hundreds of thousands of automobile workers and retirees, stop the erosion of our manufacturing base, and bolster our economy. It is our hope that the actions that Congress has taken, and that the Administration may take, will restore the preeminence of our domestic manufacturing industry so that it can emerge as a global, competitive leader in fuel efficiency and in new and path-breaking energy-efficient technologies that protect our environment. We appreciate your serious consideration of this request, and look forward to your response.

Best regards,

NANCY PELOSI HARRY REID
Speaker of the House Senate Majority Leader

In the end there appears to be three options in order of timeliness for aid:

1. The letter works, and Paulson and Bush agree to give the automakers an immediate cash injection

2. The lame duck congress could convene on November 17th and push through an economic stimulus package for $100 billion that includes $25 billion in aid to the automakers

3. After Obama takes office on January 20th a new robust aid package could be created and passed, only by then it may be too late

GM spokesperson offered GM’s gratitude for the democratic leaders efforts stating “we appreciate Congress recognizes the urgency to help the auto industry weather this troubled economic period, we hope Congress and the administration can work together to provide immediate aid.”

Source (AP)

Posted by: Lyle

104 Responses to “Leaders of Congress Now Beseech Treasury to Assist GM, Ford, and Chrysler”

Bearclaw Says:
November 9th, 2008 at 8:11 am

first!

I would certainly want there to be some limit to executive pay. I would even say they should have a flat pay structure. Blue and white collar making the same sounds good to me.

There was some mention of the UAW’s role in preventing restructuring and downsizing. I would like to hear more discussion about this before people start talking about union smashing.

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Dick G. Says:
November 9th, 2008 at 8:16 am

“stop the erosion of our manufacturing base,” ….Paulson and Bush must act now and put the money where it will do some good. The banks got there share and all they are doing with it, is hoarding it!!!

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Bearclaw Says:
November 9th, 2008 at 8:20 am

I remember reading an article a few years back that compared Union and NonUnion Auto workers pay and benefits. If I remember the Union folks didn’t make much more then the NonUnion folks.

Anyone know more?

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Bob McGovern Says:
November 9th, 2008 at 8:24 am

Dick G
Have you tried to get a loan lately? If you can qualify, such as adequate after tax income, meet down payment requirements and aren’t over extended in other debt’s , you can get some of that hoarded money. And If you are in a position to repay it.

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john1701a Says:
November 9th, 2008 at 8:24 am

What will the money be used for?

Quickly providing a high-efficiency vehicle that’s both affordable and available in large quantities should be the highest production priority. For GM, that means Cruze. Next would be a non-plug hybrid.

Returning to profitability is the purpose of this money, right?

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Van Says:
November 9th, 2008 at 8:25 am

We do not need a manufacturing base that makes foreign oil burning vehicles. Lets build lithium battery manufacturing plants, and give all those UAW folks jobs producing something with a future. Of course the benefit package would need to be similar to the benefit package the folks working in competitive industry get, not a benefit package that makes the product too costly.

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Dick G. Says:
November 9th, 2008 at 8:25 am

To put everything into perspective, remember we as a nation spend $730 billion each year to drive that 1st 40 miles each day!!!!

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Bearclaw Says:
November 9th, 2008 at 8:28 am

I just noticed the Volt in the photo above. Reminded me of Where’s Waldo. I hope we can find Volto.

I went to a Honda dealer and the owner gave me a funny look when I told him I was interested in the Chevy Volt. He said the technology is too complicated and won’t make it. He also said that honda does not plan to make a plug in car and will go straight to hydrogen. I didn’t want to tell him that I thought he and I will likely be dead before we ever see that happen. More reason to support those companies that are putting their R&D into plugins.

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Todd Says:
November 9th, 2008 at 8:36 am

I do know that a long time union memeber for GM at our Texas plant is making more than double per hour than what I make. The job – putting on lug nuts. I work for a fortune 500 company as a Server Application Admin and have 20 years of IT experiance. Does something seem wrong with this picture? I know this person is not the norm, but it shouldn’t even be the exception. Every job has a limit as to how much it is worth no matter how long the employee has been with the company. You can only learn how to put on lug nuts so fast. That should take all of a day to reach the level of expertise. The UAW certainly has had its hand in the downfall of GM. If GM and other’s get the money I would like to see a mandate on how much each job is worth with a maximum pay for that position. If you don’t advance skill level when you hit that cap, then all you see from then on is cost of living increases, that’s it. For those who complain about how much the executives make, I hear you but it’s penny’s compared to the payroll for the hourly worker. Overall if they were to give back their pay, it wouldn’t ammount to much but symbolically it would be a good move for them to take massive pay cuts. I would like to see Rick do that. Imagine what effect it would have on GM workers if Rick were to turn around and say “I’m cutting my pay by 75% until we are back on track. I hope that other executives follow.” That’s the type of leader GM needs right now.

As for part of the 700 billion, I would much rather see that money go to GM than the educated idiots in the banking industry. I am a little irritated that the banking sector just tossed up their hands one day and said “oops, we’re broke”. At least with GM we’ve known they’ve been in trouble for some time. They at least took the responsibility to try and stay solvent for as long as they could.

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Dave B Says:
November 9th, 2008 at 8:36 am

Bearclaw @ 1 said, “I would certainly want there to be some limit to executive pay.”

It reaks of socialism…but I agree. I’m pissed that AIG takes golf outings and massage “retreats” while we pay billions for it. Those folks should be prosecuted.

If Uncle Sam bails out GM, I want those $5 shares going to the taxpayers and owning the company.

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john1701a Says:
November 9th, 2008 at 8:36 am

To put everything into perspective, remember we as a nation spend $730 billion each year to drive that 1st 40 miles each day!!!!
__________________________________

Time is a perspective forgotten in that statement.

The evaporation of the guzzler market has left GM without a source of revenue here, something profitable to sell in the meantime.

GM must stop bleeding money before Volt becomes the primary focus. Volt is an investment for the long-term, not an avoid-bankruptcy solution.

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D Lo Says:
November 9th, 2008 at 9:02 am

#4 Bob M.
“Have you tried to get a loan lately? If you can qualify, such as adequate after tax income, meet down payment requirements and aren’t over extended in other debt’s , you can get some of that hoarded money. And If you are in a position to repay it.”

This is what is known as good lending practices. I take the same approach when making my investment: above minimum thresholds, who have a stake in the success of investment too, without massive debt, and of course only those who are in a position to repay it.

I think we are agreeing, but the fact that some may have come to expect lending to be without a reasonable debt to income ratio, with skin in the game to ensure you’ll follow through, and with a current means to repay the loans shows how long and far we had come from sound lending practices.

I am humbled, however, by the fact that I invested in GM and they now appear to lack several of the criteria I listed. Sadly, big oil actually fits the bill (for financial reasons only) much better.

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D Lo Says:
November 9th, 2008 at 9:08 am

#11 John1701a
“….GM must stop bleeding money before Volt becomes the primary focus. Volt is an investment for the long-term, not an avoid-bankruptcy solution”

It had been long speculated, and I think now has become much clearer, that the Volt is not only a good Idea for consumers, but one that also appeals to regulators who can IMMEDIATELY finance GM. Washington would be much less inclined to save GM if they were touting the next gas guzzler.

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Bearclaw Says:
November 9th, 2008 at 9:15 am

Didn’t Lee Iacoca pay himself $1 a year or something like that when he was CEO?

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DonC Says:
November 9th, 2008 at 9:37 am

The amount the auto companies are asking for is LESS than the amount of US taxpayer funds that Wall Street bankers want to use to pay themselves bonuses for the “superior” performance that caused them to need a bailout in the first place. (Technically the bailout funds are not being used for the bailout but c’mon, money is fungible).

Paulson needs to wake up, smell the coffee, and get something done.

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Bernie Torbik Says:
November 9th, 2008 at 9:45 am

I posted several times that GM, Ford and CrapCo should be forced to reorganize under Chapter 11 for their own good. Here’s a good article from today’s Toronto Star that provides some further elaboration on why this is the best course of action:

http://www.thestar.com/article/533168

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John Says:
November 9th, 2008 at 9:45 am

The deal should only be approved if union and non-union pay is equalized (based on years of service and experience, of course), pay tied to company performance for all executives to bring them inline with profitability (they can go up if profit increases), and a requirement to dedicate nearly all R&D into non-petroleum based cars and related technologies. The last point is key and should be the deal breaker. These complete fools in Detroit have been laughing at the Japanese invasion of small and efficient cars that started decades ago. They should have to pay a HUGE price for their lack of foresight and malinvestment!

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Bernie Torbik Says:
November 9th, 2008 at 9:58 am

RUNNING OUT OF OPTIONS

Nov 08, 2008 04:30 AM
David Olive
BUSINESS COLUMNIST

A bailout of the U.S. auto industry would only encourage more mismanagement, writes David Olive.

Rather than saving the U.S. auto industry, a bailout of Detroit would encourage more mismanagement

With all three Detroit-based automakers in dire straits and seeking a Washington bailout, the moment finally has arrived for a radical reinvention of America’s domestically owned auto industry. Which means letting the Detroit Three reorganize under bankruptcy protection, from which several smaller, more nimble and competitive firms would emerge, no longer prisoner to Detroit’s hidebound, century-old decision-making traditions.

To bail out Detroit is not to rescue the U.S. auto industry, despite how the CEOs of General Motors Corp., Ford Motor Co. and Chrysler LLC continue to misrepresent the federal bailout they seek.

For more than two decades, there have been two U.S. auto sectors. There is the familiar Detroit Three (no longer the Big Three), which are corporate cripples after decades of mismanagement.

And there are the much healthier U.S. operations of Asian and European automakers that employ millions of Americans turning out Hondas, Toyotas and BMWs, sooner or later to be joined by Chinese and Indian makers. The foreign-based firms already operate 16 vehicle assembly plants and dozens of parts plants from Alabama to Ohio to Ontario.

Led by GM, Detroit is again a holdout against progress, arguing for the continuation of a failed status quo, just as it resisted everything from today’s life-saving three-point seatbelts to fuel-efficiency standards to the devastating (to Detroit) recent shift in consumer demand to small cars from gas-guzzling sport utility vehicles and heavy trucks.

Detroit arguably stands alone in chronically failing to “get it” since its laudable introduction of enclosed passenger cabins and automatic transmissions before most of today’s motorists were born.

One way or another, Detroit has been cosseted by taxpayers and motorists since the ill-fated Chrysler bailout of 1979; followed by the Reagan-era “voluntary” quotas imposed on imports, which did not deter American consumers from paying the resulting higher prices for better-built Hondas and Toyotas; followed by repeated abeyance or postponements of fuel-efficiency standards the feds sought to impose on Detroit.

The ill-fated 1979 Chrysler bailout, which secured that company’s viability for just two decades, signalled the larger GM and Ford that they also were “too big to fail” and needn’t abandon their complacent ways. The import quotas inspired first the Asian rivals and later the Europeans to leapfrog that barrier by making in America most of the vehicles they sell in America. And granting Detroit leave from onerous fuel-efficiency standards enabled the foreign-based competition to gain a competitive advantage by complying with or exceeding the U.S. mandates.

Detroit’s sense of exceptionalism has not diminished.

Rick Wagoner, GM’s chief executive, was on Capitol Hill last Thursday making a pitch for taxpayer assistance in financing its proposed merger with Chrysler – this after Detroit had secured in September $25 billion (U.S.) in federal funds to finance development of fuel-efficient vehicles.

Yes, you read that correctly. Developing products necessary to ensure their future, as foreign-based firms have long since done with their own money, is something Detroit has to be paid public money to do.

At a moment when Washington is trying to come up with the scratch to keep imperilled homeowners from losing their homes, the Detroit makers further propose that the additional bailout funds they seek – a rumoured $10 billion in GM’s case – be carved out of the $700 billion bank bailout fund that U.S. lawmakers rightly criticize for failing to provide for homeowners as well as Wall Street banks and brokerages.

As if chutzpah weren’t enough – GM’s finance arm, GMAC LLC, which has lost $9.1 billion in the past two years as a mortgage-lending enabler in the historic collapse of the U.S. housing market – Detroit is also stooping to coercion.

GM has lost an almost incomprehensible $70 billion (U.S.) since the end of 2004, while the U.S. economy was still healthy, and yesterday reported a $2.5-billion third-quarter loss.

Barack Obama backer Roger Altman, the former Clinton-era Treasury official forced to quit under an ethical cloud, and now a top adviser to GM in its merger talks with Chrysler, warned the Obama economic team publicly last week that the collapse of any of the Detroit Three “would be a difficult way for a new administration” to take office.

Reading from the same scare-tactics script, John Snow, a mediocre if generously compensated CEO of U.S. rail giant CSX before becoming George W. Bush’s second, invisible, Treasury secretary, and now chair of Chrysler owner Cerberus Capital Management LP, told CNBC that Washington must ensure “that a vital industry like autos, which is such a big part of the overall economy, doesn’t lead us into a deeper and harsher downturn.”

Any bailout of GM, enabling it to purchase Chrysler, would be a bailout of the short-sighted dealmakers at private-equity firm Cerberus in their exquisitely ill-timed bet on Chrysler in buying the firm from Daimler AG last year, only to see Chrysler’s fortunes further plummet after the deal.

Detroit has been a significant destroyer of jobs and shareholder value for the past decade, and sporadically in decades past, as well. Worse, its sclerotic decision-making has helped hold America back from technological leadership in one of the world’s major industries.

As the cockpit of capitalism, banking is an essential service whose seize-up this September required a bailout by global governments. The auto sector is not as important, and the Detroit Three no longer account for more than a fraction of that sector.

And the latest straw GM is grasping at, a combination with Chrysler, proves again how lacking in smarts is the existing troika of Detroit CEOs. A GM already burdened with too many brands (eight) merged with Chrysler’s three brands would require a years-long shedding of jobs and closing of excess plant capacity in search of the “synergies” that former Chrysler owner Daimler found so elusive in its sorry nine-year-long ownership of the firm.

If an Obama who last week pledged to make aid to Detroit a top priority is serious about change, he will rule out a Detroit bailout. Or he and Congress will effectively nationalize Detroit, deploying a team of experts to preside over the dismantling of these firms that for generations have lacked the managerial acuity of founders William Durant and Alfred Sloan of GM, Henry Ford and Walter P. Chrysler.

David Olive writes on business and political issues. He can be reached at dolive@thestar.ca

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jan Says:
November 9th, 2008 at 9:59 am

Oil(energy) independence is the issue. The Volt is the first step in that direction. Unfair international trade agreements is a second issue. The third and toughest, imo, is health care and you all know it’s effect on the price of a car. All of these issues are at the top of the list along with tax reform for the Democrats. If GM fails then the Democrats will fail.

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greg Says:
November 9th, 2008 at 9:59 am

Why does everyone say that GM produces Gas Guzzlers.

Just because they have hummer??

GM is huge and all there trucks do better than Toyota.

Chevy has more models that get better than 30 MPG than Toyota.

So when people make blanket statements GM makes gas guzzlers is totally false.

People are idiots here who make comments like that and that’s why GM is not doing that well because of the Idiot consumer who buys foreign products from rumor.

when I see a toyota Camey go down the road with a new 30 day tag on it. I am like ohhh there it goes another one duped into Toyota PR and another Consumer Distorts Idiot.

The government needs to also do an investigation on where consumer reports is getting is donations from. They need to crack down on that company. A few years back Consumer Reports was in trouble for getting large donations from Toyota.

Because I have owned 2 toyota cars and 3 American cars and the American cars have cost me less in the long term

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john1701a Says:
November 9th, 2008 at 10:11 am

It had been long speculated, and I think now has become much clearer, that the Volt is not only a good Idea for consumers, but one that also appeals to regulators who can IMMEDIATELY finance GM.
____________________________

Clear?

Explain how many should be delivered, at what cost, and when.

Those most basic of economic criteria don’t add up. Recovery will not come from Volt. Sustaining later on, yup. Quickly ending the suffering now, no way.

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George B. Says:
November 9th, 2008 at 10:11 am

From the above quoted letter:

“the principles contained in EESA that guard against the need to recoup costs to the taxpayer. ”

My hope is that this is just a poorly worded phrase and what they meant to say was ” the need to ensure we recoup the cost to the taxpayer”. My expectation for ALL the emergency financial measures now being undertaken is that the taxpayers will recoup ALL expense, if not earn a modest profit. Chrysler was able to pay their loans back with interest so there is no reason that GM, AIG and every other private corporation benefitting from the loan program should expect otherwise. If they can’t repay the loan, they should fail. Period. Bad loans are what got us here in the first place.

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Joy Says:
November 9th, 2008 at 10:16 am

# 20 Greg

Because I have owned 2 toyota cars and 3 American cars and the American cars have cost me less in the long term.

*********************
Thank you for that, Greg. We have had the same experience with American vehicles. Some years back, my husband told me – you know, we just aren’t having the trouble-free experience that we keep hearing about with the Japanese models we’ve had. We switched to American brands in the 90’s – mostly GM, one Ford – and have been impressed with the quality. Much better than the Toyotas we’ve owned as well as the Honda, the Subaru. I currently have a 4 cylinder Saturn Aura & my husband has a Chevrolet Colorado pick-up.

The Japanese government would never sit idly by while their country’s auto industry failed. To just roll over & hand our automotive industry over to another country rather than helping it when it is struggling would just be unforgiveable.

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john1701a Says:
November 9th, 2008 at 10:18 am

Why does everyone say that GM produces Gas Guzzlers.
________________________________

They do… and so do all the other automakers, including Toyota.

The difference is that GM doesn’t offer anything else. 30 MPG Highway is as good as it gets. Where’s the option to purchase a 50 MPG vehicle?

That absence of choice is the problem.

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Cautious Fan Says:
November 9th, 2008 at 10:44 am

75 years ago, John Deere was evil, wiping out millions of farming jobs. The rest of the economy created new jobs in manufacturing which turned out to be better then the old jobs. But the gov’t wanted to help the poor farmers so they started giving out farm subsidies. 75 years later, we’re still paying over $50,000,000,000 a year in farm subsidies, and now around 1% of our population is involved in food production. What I learn from this is 1) a free economy adapts and creates new jobs and 2) Gov’t involvement doesn’t go away, it lingers like swamp gas

#23 Joy

The Japanese aren’t known for making wise economic policy. Google “Japan’s lost decade”. The gov’t interference was a deadweight on their economy for 10 years.

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Dick G. Says:
November 9th, 2008 at 10:54 am

I’ll say it again, MILLIONS of jobs will be created by replacing gasoline with alternative energy (for that 1st 40 miles)…..Grant a $20,000.00 federal rebate for the purchase of a new Plug-in electric vehicle coupled with the purchase of a Solar-Wind generating system to power that vehicle for the 1st 40 miles each day. Fund the program with a federal gasoline tax…..Get off the oil or pay the price now. Don’t leave this problem for the next generation.

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rickj Says:
November 9th, 2008 at 11:11 am

“The economic downturn and the crisis in our financial markets further imperiled our domestic automobile industry and its work force.”

Note the words “further imperiled”. The leaders of congress recognize that the auto makers were unsustainable even before the financial crisis.

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rickj Says:
November 9th, 2008 at 11:12 am

#26 Dick G. – exactly. The status quo has been exausted.

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common sense dude Says:
November 9th, 2008 at 11:19 am

the difference between a non union and a union job not only lies in the pay alone.
caw still cling to the belief that management can’t move a worker to do other factory work no matter how limiting this provision is to a struglling company. so instead of helping each other improve productivity , the union accelerates the sinking process…..down to oblivion . sink , baby , sink !!!

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Red HHR Says:
November 9th, 2008 at 11:38 am

Just get a couple of pictures of Obama getting into a Chevy…
Make sure he smiles. Then witness the power of the media.
Problem solved.

Red HHR : )

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Stew Says:
November 9th, 2008 at 11:53 am

#20 Greg

“Chevy has more models that get better than 30 MPG than Toyota.”

——————————————————————————-

GM proudly states they have “8 models with 30+ mpg hwy” Time for someone to call them out on this misleading statement.

2 models are Aveos, 2 models are Cobalts, 2 models are Mailbus, and 2 models are HHRs. They have 4. Counting the HHR, and the HHR Panel as two seperate models is streching it a bit. Likewise with the Aveo sedan and Aveo5, and so on.

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Lurtz Says:
November 9th, 2008 at 12:03 pm

All of you with “beggar thy neighbor” attitudes towards highly-paid “lazy” and inefficient unionized employees would do well to read this – from the noted commie pinko “Economist”:

http://www.economist.com/blogs/freeexchange/2007/02/do_unions_increase_productivit.cfm

Shorter Economist: Yes, Virginia, unions DO increase productivity.

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rocketman Says:
November 9th, 2008 at 12:04 pm

There is no doubting the magnitude of the economic crisis that the country is facing. It is very important that we preserve what is left of our manufacturing base, especially the automakers. They are an important component of our national security. Who do you think built all the bombers, tanks, jeeps, etc. during WWI and WWII.

In addition, we need to bring the jobs back and move to a policy of fair trade versus free trade.

Just my opinion though.

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Dave K. Says:
November 9th, 2008 at 12:16 pm

GM doesn’t need $25 billion. GM needs just enough to stay in production.

Throwing huge numbers around in hopes that the tooth fairy will sprinkle a few gaylords of pixie dust on them is a fantasy. Let’s settle down and be realistic.

The first thing that must happen is implementation of controls. These being pay adjustments for workers and for execs. And the closing of boardroom loopholes which range from bonuses to stock options.

The second thing that must happen is placing a priority on ordering parts for high demand vehicles. Volt, Camaro, Cruze, the popular Saturn models, and plug in Vue being near the top.

GM should produce 2 times as many Volt as Camaro, and 2 times as many Camaro as Envoy…ect.

And if GM really wants to get lean and mean. Then it’s time to name purchase prices for the EREV models and start taking customer deposits. This will generate between $30 and $50 million.

If GM says that $50 million on top of the $7500 tax credit isn’t enough. Then it’s, “Houston we have a problem” time.

GM has spent $600 million on opening the Chevy Cruze manufacturing facility. One factory dedicated to the two EREV Cruze models would have to run 6 days a week, two shifts, for 5 years to meet demand.

EREV Cruze sedan $28,000 per car ~ less $5000 credit = Prius killer

EREV Cruze SUV $29,000 ~ less $5000 credit = CR-V killer

EREV Volt $37,500 ~ less $7500 credit = Accord killer

Yes we can?

=D~

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statik Says:
November 9th, 2008 at 12:31 pm

I don’t think this move is surprising.

I mean honestly, the big 2.8 need a heck of a lot more than 25B delivered to there doors today, a lot more than 100 billion to save all 3.

We knew there would be a lot of appeals once they ‘fessed up to the situation.

The question is twofold. Will the gov’t cough up enough to keep them floating even more than a few extra months? And secondly, because it is a public hot button issue, is it possible the beaucracy can even move fast enough (with enough cash) to head-off what is coming.

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Bud Says:
November 9th, 2008 at 12:33 pm

I am a Volt fan too but we have a capitalistic system that allows failure which creates more efficient companies. Government rewards for failure will only prolong the problem. You might as well let the government own the company. Even China figured out that doesn’t work. If the Volt technology is good it will survive and thrive.

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Joe Says:
November 9th, 2008 at 12:41 pm

I’m astonished with the response to this post. As Americans this how we should think. Thanks for giving some hope for the future of our younger generation, if only our government can see it the same way. I am pleased not for the reason I’m retired from GM, but for the fact that we have to stop the bleeding of our industries to foreign countries. I’ve always hated to see our companies being put out of business or being bought by foreign countries….and that goes for all of our great industries.

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Red HHR Says:
November 9th, 2008 at 12:44 pm

It is time to sell cars now! Time for a TV/internet campaign sale with a politic twist. Obama drives into the sunrise in a Malibu, Nancy goes across town in an Impala. Biden steps out of a Buick. In the spirit of bipartisanship, Pailen stops at the daycare center in her Acadia and McCain heads off into the sunset in his Silverado.

The punchline? Barney Frank goes to the bank in his Aveo to guarantee the loans.

The result? Cash flow goes up. The question? Who gets to drive the Vett?

Red HHR (In the HHR)

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Jason M. Hendler Says:
November 9th, 2008 at 1:06 pm

I am glad that the House and Senate Majority Leaders stated in writing that they feel the auto industry should be put in consideration for help under the $700 billion bailout package, so that the administration has clear guidance that they are allowed to make such moves.

As long as the government’s equity stake does NOT consist of voting shares, but only consists of NON-voting, preferred shares, I am OK with the plan.

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Red HHR Says:
November 9th, 2008 at 1:29 pm

The Corvette? Ophra.

Red HHR (Off to gaurd the windmills)

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carcus Says:
November 9th, 2008 at 1:34 pm

Pure insanity.

What in the hell does Nancy Pelosi or Harry Reid know about the automobile business?

Nothing, absolutely nothing.

Would anyone here send a check to Nancy or Harry and say, “Here, please invest my life savings in whatever stocks you think are good.”?

Are any of you that support the loans to GM actually buying GM stock?

I didn’t think so.

Leave my tax dollars out of this!

Politicians and citizens: Control your fear. Have a little faith in the principles this country was founded on.

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fred Says:
November 9th, 2008 at 1:38 pm

Exellent postings today. (except for #41)
We really need some electric plug in vehicles for sale.
How much longer we have to wait?
I’m ready to purchase.

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john1701a Says:
November 9th, 2008 at 1:56 pm

Obama drives into the sunrise in a Malibu, Nancy goes across town in an Impala. Biden steps out of a Buick.
________________________________

Consider merit of the efforts being proposed.

Selling enough status-quo vehicles to get by on their own would earn a “D” grade, since that’s pretty much the minimum required.

“C” would be making a profit with modest sales volume.

“B” would be fairly competitive, but with little advancement forward. Traditional vehicles are a dead end. Designs taking advantage of batteries & motors are future. To watch extent is the question.

“A” grades come from vehicles that significantly improve both efficiency & emissions at a competitive price in large volumes.

Please explain how Volt fits into the financial recovery picture.

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George K Says:
November 9th, 2008 at 2:00 pm

#3 Bearclaw
“Before the new deal cutting benefits:
“it’s estimated that GM workers earn an average $73 an hour when benefits including health care and pensions are added in. That appears to be about $25 an hour more than Toyota’s US. (non-union) workers

Last year, Toyota’s top 37 executives earned a combined $21.6 million in salary and bonuses, At Honda, the top 21 earned $11.1 million, combined, in salary and bonuses, SEC filings show.”

Couldn’t find an aggregate for US auto execs. though I know it’s much, much higher.

from Oct. 07 article:

http://74.125.95.104/search?q=cache:-gMjvFlSb-EJ:www.usatoday.com/money/autos/2007-10-09-auto-exec-pay_N.htm+toyota+us+union+pay&hl=en&ct=clnk&cd=1&gl=us

Here’s a what if scenario:

Chapter 11 reorganization for Big 3. Out of that comes ONE company w/ 6 profitable lines, plus GM Volt (E-flex), while Chrysler’s 3 electrics to be converted to E-flex.
Work out a plan for workers let go. New company has no unions, but continues to pay benefits of all retired workers. Management pay must match Japanese salary culture.

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Exp_EngTech Says:
November 9th, 2008 at 2:04 pm

Rick Wagoner:
“OK, let me get this straight Senator, Uncle Sam is requiring that GM immediately license our newly developed E-Flex technology to our other US based competitors. In addition, we must ONLY SELL passenger cars with E-Flex by 2013 and light trucks by 2015? Are you mad?”

“What are you going to do if we don’t agree to sign this silly thing?”

Senator WindBag:
“Then….NO SOUP FOR YOU ! ! ! ……. NEXT !”

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CDAVIS Says:
November 9th, 2008 at 2:21 pm

______________________________________________________
Conundrum:

I several years ago had the privilege to serve as one of seven commissioners for a small town. During the first year of my three year term, our town decided to increase our 14 person police force by two police officers. The question became how to pay for it. The incumbent commissioners had devised a clever proposal of upping the fees for certain city services to pay for the added cost. I and one other first term commissioner proposed to eliminate the “Landscape Maintenance Department” which was a sub-department of the “Grounds & Building Maintenance Department”. The Landscaping Maintenance Department had two full time employees and equipment dedicated too maintain a green area of less than two acres comprised of mostly a single entrance grass lawn, a perimeter hedge, and five trees. Each of our two landscape technicians were earning over $80,000/year plus very generous benefits. The town was spending $210,000/year of taxpayer dollars to maintain the Town Hall lawn. We had a proposal from an outside lawn maintenance company to maintain the Town Hall lawn for $19,700/year; a savings of $190,000/year. This savings would have paid for the two added police offers with money left over. You can guess the outcome. This town is today in a financial crises because of the drop of property values has significantly impacted the towns revenue. This town is still funding a Landscape Maintenance Department despite their financial crisis. States and Federal Government operate the same way but on a much larger scale.

What does this have to do with the GM crisis?

Does the Federal Governments’ management of its own affairs give reason to believe the government will somehow be successful in regulating/co-managing the expenses of GM (which the government will end up doing as part of the terms of a bailout/loan)?

Does a government bailout/loan make it more or less difficult for GM to address the deeper foundation cost challenges it has? Keep in mind that much of the foreign cars sold today in America are manufactured in factories located inside the United Sates therefore forget the foreign labor cost argument.

Will a bailout/loan expedite or slow down GM’s needs to continue converting its fleet to more fuel efficient vehicles and expand the VOLT Program?

Is it good for America’s short term and long term future to ask its taxpayers to underwrite the cost of each car that GM sells? We will already be doing that in part with the $25B alternative vehicle subsidy that has passed. The minimum total cost of a government bailout/loan of GM would be minimum $200B then $2B/month when it is all send and done which includes picking up legacy pension liabilities. This means that we tax payers will end up subsidizing the cost of each GM car sold by 15% to 40% during the next five years with the hope that somehow a portion of that is going to be paid back to the taxpayers by GM.

There is a valid argument that the taxpayer will have a larger cost to cover than a GM bailout/loan if GM does go under because of the loss of jobs. But there is also the argument that GM would be forced to re-organize and better prosper as a more competitive company which will result in more net jobs created.

I pose the above as questions because I’m not smart enough to calculate what would be best for America on this one. I know there are a lot of jobs riding on the line. My thoughts and prayers go out to all the GM employees especially those working on the GM VOLT Program.

______________________________________________________

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The Anti-Oil Jihadi Says:
November 9th, 2008 at 2:22 pm

I had earlier said that I think GM might go to bankruptcy to restructure.

However, I just realized something. There’s a big difference between the airline companies and a manufacturer.

With an airline you just rent a seat for a few hours.
With a car, you’re buying a 10 year asset for tens of thousands of dollars.

I suspect people wont want to buy an asset from a manufacturer which is bankrupt. Thus GM does have a strong motivation to avoid bankruptcy. Perhaps they’ll temporarily fight the union in bankruptcy court, but any bankruptcy must be very short term for GM.

I’m giving one of my many wifes $1000 for her roth IRA, to buy into GM on monday, since I maxed out my 2008 account already.

death to oil – http://www.oiljihad.org

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Lurtz Says:
November 9th, 2008 at 2:28 pm

#41 Carcus: “Are any of you that support the loans to GM actually buying GM stock?”

You have it exactly backward. If you think the feds will give GM billions of dollars to prevent bankruptcy, you WOULD buy the stock. The day that bailout (loan) is announced, the stock price will certainly rise as the market seems to have priced in a failure.

Like GM or not (/Mayor Newsom), buying stock at this price is a high risk play for a bailout. The probability of a bailout (loan) is extremely high due to the politics and symbolic importance that most people assign to GM.

(IMO, bailout/loan plus the feds assuming GM’s social obligations would make GM a powerful competitor again)

And to answer your question, Carcus, yes I have. Honestly, I don’t necessarily agree that GM deserves a bailout, but I weighed the likelihood of the feds supporting GM at all costs versus bankruptcy, and I decided I liked the odds.

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Len Says:
November 9th, 2008 at 2:41 pm

25 billion will only prolong the agony. They need something like 200 billion if I remember some of Statik’s calculations. Of course Wagner doesn’t contemplate chapt 11, he would loose his fat pay check.

I believe it is a mistake to link pensions and health care to jobs. It adds too much of a burden to a company to compete in the world. These are costs that other modern countrys have decided that the government should guarentee at a basic level and the rest is up to the individual. In a way they are subsidies that these countries are giving their businesses. Because of our politics we have been the last to see this and it is one reason we have a hard time competing on the world level.

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Casey Says:
November 9th, 2008 at 2:43 pm

#4 Bob

my gawd man, that’s the way its supposed to be.

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chevonly Says:
November 9th, 2008 at 3:05 pm

DasVedanya Comrades:
To be a Republican is to de value the work of the middle or lower class. Remember Comrades that our former living standard was helped by the unions. People made more money and then they spent more money and everyone prospered for a short time. But of course now its you against me and you make to much money for what you do.
The end game continues we are on our own the line between Republicans and Democrats is very thin, it is not in there interest to help Joe six pack, they have damaged the tax base and income base in this country to the point of no return. So keep bitching about the unions and everyone else that you think makes to much money while congress keeps borrowing money to help out the crooks in wall street . WE ARE FREAKIN DOOOMED !!!!
So enjoy the ride in your Japanese car and feel good that some union employee didn’t make that much money off of you and maybe someday you short sighted boobs will wake up of course its already to damned late.

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avatar Says:
November 9th, 2008 at 3:07 pm

#26 Dick G.

I agree and you are correct. Set a benchmark price for gasoline and diesel- $2.50 above cost. Right now we would be paying less than $5.00 per gallon, but the tax revenue would be in the $billions.

Use those billions to give individuals, not bankers and government idiots the chance to:
a. Build a home energy system- solar or wind.
b. Purchase a plug in car.
c. Start an energy savings plan. People would eventually save millions if not billions of dollars by not purchasing gas and oil products. Give people an incentive to save that money and inject it back into the markets for further energy development.

A win, win, win for everybody, except of course big “grease” (oil).

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Rashiid Amul Says:
November 9th, 2008 at 3:08 pm

If I was asked what to do with my tax money, my choice would not be to save the auto industry.

My choice would be for GM to file Chapter 11, reorganize, and come out much leaner and ready for a champion fight.

I would want my tax money to go into a Manhattan project for battery and electric vehicle technology.

But if my tax money was to go towards saving the Big 3, then once again I say the leaders of those companies need to take a MASSIVE pay cut.

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Joe Says:
November 9th, 2008 at 3:43 pm

Rashiid Amul Says: @53

A massive pay cut?? Haven’t you heard, the domestic auto worker wages have been cut in half. If you don’t think that’s enough, then that’s just too bad.

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carcus Says:
November 9th, 2008 at 3:44 pm

#48 Lurtz,

…..”you WOULD buy the stock. The day that bailout (loan) is announced, the stock price will certainly rise as the market seems to have priced in a failure.”
____________________________________________________

Yes Lurtz, I understand your point, but I think you totally missed mine.

My point (political in nature) was to those who support the bailout: If you want to invest my money in GM, you should be willing to invest your own, first.

Sounds like you’re planning on selling your stock soon after the next bailout is announced. How did that work out for those who bet GM on the last $25 Billion $ bailout (retooling)? (sep 27th, I believe?)

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Rashiid Amul Says:
November 9th, 2008 at 3:47 pm

#54 Joe,

Can you read english? I said LEADERS of the companies.

(Quote)
George Says:
November 9th, 2008 at 3:48 pm

#9 Todd, Well said. I could not agree more.
Greed has gotten us in this mess, not only on Wall Srteet but union leaders and workers, investors and the public who have been buying large impressive SUV’s that they don”t need.
The Volt represents a future that the United States can again be a leader in. Does anyone think that Japan ( or another country) would let it’s auto industry go under because people got greedy.

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Arch Says:
November 9th, 2008 at 4:31 pm

Well things are getting worse. There might be some short term relief
with the lower gas prices. Most money spent in a local area will turn over several times. No so with money spent on gas. 95% of that money never turns over again. It goes to the folks who make the gas and the ones who pump the oil. People are not saving as much so there is no money to loan. Just take a look at how much money leaves this country each month just to pay for oil. Thats why the government is trying to pump CASH back into the economy. Just go back and looked at what happened after the first oil mess. Intrest rates in the early 80s hit 10% as banks tried to get money to come in the door. You can blame it on a lot of things but high oil prices will do it every time.

Take Care
Arch

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Casey Says:
November 9th, 2008 at 4:37 pm

I don’t know why all the complaining about our elected officials in congress when YOU IDIOTS keep voting them back in

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carcus Says:
November 9th, 2008 at 4:49 pm

#42 Fred,

“How much longer we have to wait?
I’m ready to purchase.”

_________________________________________________

Don’t wait, act now!

The $3,000 Volt

Considering that GM stock was trading for nearly $43 a share only 1 year ago, here’s how you get your volt for just $3,000.

Step 1: Purchase $3000 of GM stock on Monday morning
($4.36/share)
Step 2: Hold till stock recovers to 2007 levels. (Won’t have to hold long. It’ll bounce right back after the next bailout.)
Step 3: Reap 10x gains — cash your stock in and you’ve got
$30,000 to take to your nearest GM dealer!

[ post drips of sarcasm, but I expect an advisor's fee if this actually works]

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statik Says:
November 9th, 2008 at 5:25 pm

#49 Len said, 25 billion will only prolong the agony. They need something like 200 billion if I remember some of Statik’s calculations. Of course Wagner doesn’t contemplate chapt 11, he would loose his fat pay check.
———–

That is the problem I was getting at exactly. I actually don’t have a problem with giving out 25 billion dollars to save the ‘big 2.8′ as they exist today…you have to look at the pros/cons and checks/balances and come to a place that makes sense.

However, if one gets money…all three get money. 25 billion isn’t going ot do squat. 100 billion is not going to do squat. GM, Ford and Chrysler collectively burned through almost 20 billion this quarter alone (more if you allow for the final credit draw downs).

To bail them out ‘properly’…and by that I mean, in a way that allows them to continue as a going entity, you first have to ascertain the condition of the sector and the relative health of those you are bailing out.

I think we can assume the auto industry is not going to improve in 2009 (Fritz Henderson said he expected it to be flat thru 09). So best case is GM, Ford, Chrysler continue to post numbers similar to this quarter…if not worse. Therefore they need at least 100 billion today just to see them through next year.

So if the first 100 billion dollars is just short term ‘operating cash’ while they try to reorg/realign themselves…then what does ‘reorg/realign’ entail?

It means getting rid of expenses, trimming production and getting salaries under control, paying off VEBA, proping up their auto/dealer financing avenues, getting suppliers out of C11…while also reinventing their lineups of cars to be congruent with society,

So lets price tag all that (conservatively):

Operating Cash to cover expected short term loses: 100 billion
Cost to streamline: 50 billion
Cost to purge salaries: 10 billion
Cost to fufill VEBA commitments: 30 billion
Cost to bail out suppliers (Delphi, AA, etc): 20 billion
Cost to re-establish GMAC/Chrysler Financial and shore up Ford: 50 billion
Cost of ‘re-tooling’ already approved: 25 billion
Cost to pay off corporate debts that are responsible for all this: 100 billion

Add it up: 385 billion…thats minimum. Even under the 700 billion bank bailout, that money is going a thousand different ways a;lready…there is not enough, heck I doubt there is even enough room in that for GM to see more than a marginal fraction. That 700 billion package may have to expand to 2 trillion before everything is accounted for (if you are still intent on the ‘bail out’ path)

Now, after saying all this, and assuming the gov’t ponies up the minimum 400 billion dollars, that is still no guarantee even 1 of them can be successful. It has to be C11, with the gov’t helping them out as a ’special case’ with the rules & regs inside bankruptcy to maximize their chances. (Still would be better for one of them to just fold up first).

/just my opinion

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DocM Says:
November 9th, 2008 at 5:32 pm

Problem with bankruptcy of any flavor is that polls show 80% of US car buyers would not buy from a firm in bankruptcy – so matters would get far worse at warp 9.95.

(Quote)
RichardG Says:
November 9th, 2008 at 5:34 pm

I haven’t seen (but it may have been written) that if one or more of the Big Three files either Chapter 7 or 11, the US Taxpayer is on the hook for the entire pension plan(s) which will cost $Billions, far more than the $25 Billion the companies are asking for, over the life of the retirees. I’m not saying that the loans or bailouts are a good thing but we are on the hook no matter what happens.

Also, if the companies go into liquidation, you all make it sound so easy just to sell assets. Who will buy old GM or Ford manufacturing plants? It is cheaper to build new assembly plants in the southeast.

One last thing, I mentioned this several weeks ago, but the Japanese auto companies use “transfer pricing” to create losses in their US plants and shift the “profits” to Japan and offshore entities. Business Week Magazine estimates that the Japanese auto companies now owe nearly $50 Billion in back taxes to the US Government. Money we will never see.

(Quote)
Joy Says:
November 9th, 2008 at 5:48 pm

#25 Cautious Fan Says:

The Japanese aren’t known for making wise economic policy. Google “Japan’s lost decade”. The gov’t interference was a deadweight on their economy for 10 years.

*******************************
I must have read a different article when I searched as you suggested. What I read said that the situation worsened when the government waited several years to bail out the banks. So, yes, they erred, but it was more a matter of not “interfering” soon enough. Also, this article pertained to a real estate bubble & the resulting banking crisis, not the automotive industry.

The Japanese automakers benefited from their government “interfering” with regulations that prevent other countries from trading equally with them. Our leaders have not addressed this situation & now it is too late. Perhaps a bailout will help, perhaps not, but to do nothing while millions of jobs will be lost when this industry fails would be foolish.

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DonC Says:
November 9th, 2008 at 6:40 pm

#25 Cautious Fan – “The Japanese aren’t known for making wise economic policy. Google “Japan’s lost decade”. The gov’t interference was a deadweight on their economy for 10 years.”

Actually the problem was that the government didn’t intervene. It took a very passive approach at first, letting the companies paper over the issues by changing the rules, much like the Reagan administration first tried to “solve” the S&L problem by changing the rules on how much equity S&L’s needed to have. The Japanese economy started to move when the government finally took some decisive steps, followed the Swedish model, and made direct investments in their banks.

Also the Japanese haven’t been too shabby on the economic front when you look at the Japanese performance since WW II.

(Quote)
Len Says:
November 9th, 2008 at 7:08 pm

China just announced a $586 billion stimulus package. Their economy is a quarter the size of ours. It appears that it will be spent on infrastructure and is designed to reassure the population that the government will do what is necessary to keep the economy moving. The article mentioned that rather than double digit growth, it had fallen to 5.8 percent.

http://www.nytimes.com/2008/11/10/world/asia/10china.html?hp

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nuclearboy Says:
November 9th, 2008 at 7:20 pm

“The Japanese haven’t been too shabby on the economic front when you look at the Japanese performance since WW II.”

This is because the US went in and spent a large sum of money getting their economy up and running and providing a huge market for there inferior products. The Japanese made Junk for years and we bought it willingly. We were rebuilding their country and they were becoming a democratic country.

There products eventually improved and by the mid 1970s they were starting to look good. Prior to this it was not uncommon to call Jap cars a “Nagasaki Nut Bucket”. Probably not too PC in 2008.

From what I have read the Japanese spent many years dumping electronics into our country is an organized effort to take over the electronic industry. These guys don’t always play fair. They won this game. We have no significant Electronic industry.

Their car industry benefits from a close cooperation with Govt. For instance, Our Govt. spent 25 million on battery research last year. The Japanese Government spent over 200 Milliion. I wonder if Toyota will have a good battery in a few years? You don’t need a bailout when you continually benefit in this way. We have dropped the ball.

Look up the current situation in rice. The Japanese will not let our rice in because it would put their farmers out of business. They buy a little rice from us and let it rot but they won’t let us compete.

Simply put, the Japanese economy is doing great but they have benefited greatly from the US and they play the game to win.

I for one support the bail out 100% in order to keep our manufacturing base strong. For me it is a national contest (economic warfare) and I don’t like the idea of the Japanese winning this one (again).

Instead of being pissed off at GM and its workers (Americans like us; (some of us anyway )), we should be pissed off at our government (both parties). They have run up huge deficits over the past 30 years and they have no plan to stop. Each year they get bigger and bigger. They spend money in secret, vote on bills they have not read, and more or less pimp themselves to get re-elected. These are the people who have run us into a ditch. They could have set standards long ago to make our country better. They did not.

(Quote)
Len Says:
November 9th, 2008 at 7:28 pm

Tesla Model S:

http://www.roadandtrack.com/article.asp?section_id=10&article_id=7201

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RB Says:
November 9th, 2008 at 7:46 pm

at #61 statik gave a list of where bailout money has to go:

So lets price tag all that (conservatively):
Operating Cash to cover expected short term loses: 100 billion
Cost to streamline: 50 billion
Cost to purge salaries: 10 billion
Cost to fufill VEBA commitments: 30 billion
Cost to bail out suppliers (Delphi, AA, etc): 20 billion
Cost to re-establish GMAC/Chrysler Financial and shore up Ford: 50 billion
Cost of ‘re-tooling’ already approved: 25 billion
Cost to pay off corporate debts that are responsible for all this: 100 billion

=======================================

Reviewing this list, one sees that a big chunk of bailout funds will go to bondholders and others who have chosen to lend GM money (100 billion to banks and investors), and another big chunk for short term losses (that is, paying to finish up building SUVs and trucks). A third big sum (50 billion) goes to GMAC, which has made a huge number of bad loans. This last is the only one that has a relation to the original federal bailout’s purpose, helping the banking system, and that is a reach, since GMAC is not an important commercial bank.

So, though the plea is to save jobs, help workers, and modernize, those are relatively small items in statik’s list — most of the money is going to go to investors, to suppliers and others dealing with the present product line, and GMAC’s bad car loans. Is this really what we want to use 250 billion of taxpayer money to do, or should these losses be born by people who understood the risks and chose to take them?

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jbfalaska Says:
November 9th, 2008 at 8:04 pm

What an outrage! Of course the CEO pay packages should slate $70 billion, one of every ten dollars of the bailout to CEO pay and benefits. This is America for goodness sake. No way should we steer that money to save the US Auto Industry.

Come on – give us all a break. Revoke the bailout and help America. Save the US Auto industry. That CEO ripoff paycheck from the bailout could instead buy every single American going to a dealership for the next two years a brand new Chevy Volt. These ‘Captains of Industry” have sold out Capitalism and America. Jail, not a bailout should be their part of the bailout package.

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Dave K. Says:
November 9th, 2008 at 8:08 pm

hi nuclearboy #67,

“…Instead of being pissed off at GM and its workers…”

________________________________

I don’t believe anyone is pissed off at GM workers. We are looking at the current status of a car company and pointing out several dozen reasons for the negative cash flow.

Employees of companies (in this current economic environment) would rather see 20% less in yearly earnings compared to sitting on a couch watching “The Price Is Right” reruns.

Myself and my family are dealing with a mild negative cash flow now. And have been for five years. We are making changes to what we do. Less driving, less sports, less dining out, more hours worked. The core of what is important to us as a family is unchanged. We just cut the fat. I will admit that we received a small bail out check from President Bush. And it was well timed.

Get it together GM or get used to pretzels and peanut butter on your living room couch.

http://garfwod.250free.com/Photos/Volt%20cord.jpg

=D~

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jbfalaska Says:
November 9th, 2008 at 8:09 pm

CHEVY VOLT: American-made, American-fueled.

After 20 years of patrolling the oil highway, and now retired, I’m going to do my part if GM would build this marvel by buying one for me and one for my wife. Both of us are retired military and saw first hand where the Oil Barons and a certain segment of our politicians were interested in seeing to our oil addiction and monetary dependency flowing from those hundreds of billions of exported dollars.

Come on GM – survive.

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BillR Says:
November 9th, 2008 at 8:14 pm

#33 Rocketman

I actually posted this in a previous thread, but It was somewhat late. It concerns the trade deficit, and a suggested fix. Written by some guy named Buffet.

http://www.berkshirehathaway.com/letters/growing.pdf

Makes a lot of sense to me.

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Dave K. Says:
November 9th, 2008 at 9:00 pm

hi jbfalaska #72,

“American-made, American-fueled”

_______________________________

The Volt battery is made in South Korea.

_______________________________

“The eyes of the world are now on the Volt. It’s the future of America and the world.”
John McCain ~ summer 08′

=D~

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nuclearboy Says:
November 9th, 2008 at 9:06 pm

The Buffet article is a great read. Many have been saying for years not that you cannot spend $1.30 for every $1.00 you pull in forever. This system is impossible to maintain.

This is why I mentioned earlier that we should be pissed at our Govt. It is the Govt that has taken the US credit card and run up a huge bill. They spend our money to earn favors to get re-elected and then try to claim they are doing it to help people.

If you give me your credit card, I can help you too. I can be very generous with your money. Of course in the end, you will get stuck with the bill.

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Exp_EngTech Says:
November 9th, 2008 at 9:33 pm

FYI….

CNN Web Site Poll

Should U.S. automakers get a government bailout?

Yes 31% 12303
No 69% 27739

Total Votes: 40042

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carcus Says:
November 9th, 2008 at 9:34 pm

#72, #74,

“American-made, American-fueled”
_______________________________
The Volt battery is made in South Korea.
_______________________________

If you charge your volt with solar panels then it’s G2V star-fueled.

/ I’ll go back to watching Star Trek reruns now.

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Koz Says:
November 9th, 2008 at 9:39 pm

There are a lot of goods points brought up here, both for and against bailout and bankruptcy. I just can’t see bankruptcy being a good option. Think it through. How much additional debt would a bankrupt automanufacturer accrue before restructuring occurs? Their burn rate would probably double. Who is going to fund that? It seems that the only bankruptcy option is Chapter 11. The credit holders (suppliers) cannot carry them through Ch 11.

Now think strategically. It is obvious that Chrysler is not viable as is. In all likelihood it will be sold piecemeal and liquidated. If the government must be involved, which I believe it must, then the most viable scenario is to facilitate a GM-Chrysler merger and loans for Ford. Clearly the auto manufacturing industry is contracting and will continue to do so. The most important priority should be preserve as much as possible that can be viable long term. We could debate Static’s numbers but no matter how you calculate them they will be pretty huge. And as several have mentioned, there isn’t much point to transfusing a patient that is still hemmorhaging at a faster pace.
-Cerebus wants to unload Chrysler, GM (and Ford) would benefit from reduced supply and perhaps avaible credit(?), financing (for good reason) is the obstacle
-Government finance the merger to keep as much viable manufacturer under American based control
-As part of the merger negotiations: plant closures are understood, retiree obligations are understood, UAW contracts are renegotiated to allow the combined company to be able to compete, management downsizing is understood, suppliers are negotiated with, Cruze/Volt and other critical near term vehicles are funded, current stockholders lose most value, government gets “non voting” preferred stock (for Jason).
-Ford must go through similar cuts to receive their loan.
-Government initiates a program to purchase only “high mileage vehicles” for all it’s vehicles, including pressuring states and US Mail
-Tax advantages for business purchases refined to more greatly favor high “in class” mileage vehicles (e.g. more incentive to buy 2-mode pickups and hybrids vs their conventional ICE only counterparts)

This will result is significant job loss and less production but much, much better than bankruptcy liquidation. Most importantly 2 automanufacturers are left to compete for the same sized market but with substantially less supply. They must be able to get their production costs more in line with the Japanese US plants or what would be the point?

(Quote)
jefro Says:
November 9th, 2008 at 9:46 pm

Don’t worry, Clinton signed the NAFTA agreement. We can get cars and trucks from Mexico and Canada. We don’t need American workers.

(Quote)
Dave K. Says:
November 9th, 2008 at 9:49 pm

When the EREV Volt, Cruze, and EREV Cruze are in showrooms. Along with the plug in Vue and the V6/V8 Camaro models. GM will easily be able to stabilize their cash flow shortfall.

The people of the world want to be able to daily drive for 50 miles on just $1 of gasoline. Or in some cases, G2V star-fueled solar panels.

GM dealers, name a price and take deposits now. Leverage the already approved $7500 EREV Volt / EREV Cruze tax credit. We eagerly await the announcement.

=D~

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D Lo Says:
November 9th, 2008 at 10:26 pm

John1701a Says:
Obama drives into the sunrise in a Malibu, Nancy goes across town in an Impala. Biden steps out of a Buick.
________________________________

Consider merit of the efforts being proposed.

Selling enough status-quo vehicles to get by on their own would earn a “D” grade, since that’s pretty much the minimum required.

“C” would be making a profit with modest sales volume.

“B” would be fairly competitive, but with little advancement forward. Traditional vehicles are a dead end. Designs taking advantage of batteries & motors are future. To watch extent is the question.

“A” grades come from vehicles that significantly improve both efficiency & emissions at a competitive price in large volumes.

Please explain how Volt fits into the financial recovery picture.

- – - – –
Is this the Simpsons? Three completely unrelated items: 1. a quote which you make no point about. 2. a proposed grading scale, and 3. a question about how the volt translates to financial recovery.

I’ll help you make sense out of this. Using your scale, the Volt is an A, maybe not 2010, but in 2011 or 2012. Rome, was not built in a day and cars take years to develop. Lets assume you have a better idea right now (lower emissions, longer range, etc), sorry, that will be out in 2013 or 2014.

GM, or for that matter any good company, cannot shrink to fit market share. A good company, under good leadership, is going to look for opportunities to grow market share and demand to meet output and infrastructure. With the Volt, an ‘A’ player, GM is trying to do exactly that.

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D Lo Says:
November 9th, 2008 at 10:29 pm

Dave K,
What’s the obsession with the EREV Cruze?

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john1701a Says:
November 9th, 2008 at 10:54 pm

Three completely unrelated items: 1. a quote which you make no point about. 2. a proposed grading scale, and 3. a question about how the volt translates to financial recovery.
____________________________________

Pointless was the point of #1. Grading scales, like in #2, have been used since the beginning of hybrids; all are far from equal and some don’t actually accomplish much. #3 is what many have been eluding… how can recovery come from the sale of so few many years from now?

.
I’ll help you make sense out of this. Using your scale, the Volt is an A, maybe not 2010, but in 2011 or 2012. Rome, was not built in a day and cars take years to develop.
__________________________________

That is not recovery.

It is the road to SUSTAINING profit AFTER recovery.

The cash runs out next year! A large quantity of something must be sold until Volt technology is available in mainstream volume. What will it be?

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js1219 Says:
November 9th, 2008 at 10:59 pm

I really wish there was or hope there is a mandatory clause that if they receive taxpayer money, they should:

1) Urge the electrification of the automobile.

2) Make Ford and Chrysler spend the few hundred more per car and make their entire line of cars bio-fuel capable like GM

3) Have NG cars

4) At least 35 MPG on all cars that are not E-REVs, NG cars.

I really don’t want to see a bail out by our government if they turn around and continue with their 2009 pickups and SUVs at 14-16 MPG and use only petro.

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jbfalaska Says:
November 9th, 2008 at 11:07 pm

Carcus, the battery manufacture is moving to America – Michigan is the latest news. Right near the Volt point of manufacture. For now, the development is overseas. The choice was China a.k.a., A123 battery, or LG in South Korea. Part of the award of the contract was a commitment to making the batteries here.

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jbfalaska Says:
November 9th, 2008 at 11:20 pm

My only point was to suggest conditions should’ve been put into the bailout to the banks. One party, I shan’t name here, fought out any pay caps and limiting CEO pay to make the compromise work. NET RESULT – The biggest programmed CEO pay and benefit packages are now underway in our history. Our government appears to have tried to hide this fact in the beginning, probably due to embarassment, who knows though. It was a British company looking at the buyout of one of our near defunct banks which created a stir when they noted deal busting ledger adds for the CEO compensation. That led to more looks, and more looks by others until the British press had to notify our news media to report. The amount wound up being $70 billion of the $700 billion dollar bailout package.

I certainly agree with several of our Volt postings to tie the bailout to creating American jobs and set goals for the money. That $70 billion dollar portion now slated to go exclusively to already overpaid CEO as more pay and benefits, including enriching golden parachutes, would have bought every American shopping for a car for the next two years a BRAND NEW CHEVY VOLT. Not only would that have proven good for America, but obviously helped us peel away at the power of the Oligopoly OPEN oil barons now running our Oil President.

Sorry, but I’m angry over how we’ve been sold out as a nation. Equally, I’m apologetic at the military career I had and so many of my friends, young men and women, who spent time serving to protect oil barons’ petrol highways and all to help those barons who now have nearly $4 trillion American dollars in their pockets. Every year we add another $700 billion exported in raw dollars to pay for our oil addiction at cost of lives to our young men and women who are now serving behind me. The Volt was a first and maybe last hope to do my minor part.

PROUD AMERICAN hoping for: GM Chevy Volt: American-made, American-fueled.

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statik Says:
November 9th, 2008 at 11:20 pm

I think a lot of people are just blowing past the fact that a bailout is readily available.

You think the Republicans are going to line up behind a massive bailout of the ‘big 2.8′? Everyone and their dog knows it has little chance of success, regardless if you think it is the right thing to do or the wrong thing.

If they (republicans) get behind it before they are out, who do you think is going to take the heat for it when it falls on its face and the economy swoons farther? Yupe…the republicans. Their rep is already in the crapper…they aren’t in any hurry to put the final nail in their coffin.

Look at all the time and effort and drama attached to bailing out the core of the system with that 700 billion. I’d conservatively put odds on getting any new package put together and the money doled out by Jan 20th at 10 to 1. It makes all the sense in the world for dems to say they are ‘gung-ho’ right now…just wait and see their tone in February.

At least one of them have to die…thats just life. Chrysler is the wild card because Cerberus can do anything on a whim…kill it overnight, or fund it through 2009. Ford, even by my ‘negative nellie’ eyeglasses can survive 100% through the summer of ‘09 and probably scratch out the entire year. No one in gov’t or the US wants the big nameplate ‘GM’ to go under, they would much prefer Chrysler, with Ford in second, but if no one steps up GM is the one in the weakest spot.

C11 is still most likely here (I don’t really believe C7 is a option that would go down for GM, maybe Chrysler if it was abandoned by some fancy footwork by Verberus). In C11 GM can be protected..although thrashed in size. Chrysler destiny is probably being chopped up-either by Cerberus or C7. Who knows with Ford, right now their move is to just mimick whatever GM does, so lets stick with the trend and they follow GM into C11.

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carcus Says:
November 9th, 2008 at 11:49 pm

#85 jbfalaska,

“the battery manufacture is moving to America”

________________________________________

I was aware, just trying to make a joke (out of this country, …out of this world…) not much of a joke really.

but anyway,

I guess it’s ok if we then say:

Honda: American-made
Toyota: American-made

(Quote)
carcus Says:
November 9th, 2008 at 11:58 pm

Anyone know if GM and the rest can “furlough” their employees like the airlines do?

Seems to me that would be in order until 2010 or so when the retooling is finished and maybe enough of the credit woes have subsided so there’s more of a demand for new cars.

(Quote)
kent beuchert Says:
November 10th, 2008 at 12:18 am

Sorry, Pelosi, but my tax dollars will not be used to pay off your union supporters by propping up the companies that they have destroyed. I note that not one single thing has been mentioned about exorbitant union wages or even a hint that those pirates
might be asked to forego some of their $135 per hour compensation packages. Perhaps the end of the gravy train for the UAW. Good riddance. 60 years of raping the American consumer will come to an end. A good thing.

(Quote)
Red HHR Says:
November 10th, 2008 at 12:18 am

How many cars would GM have to sell to create a positive cash flow?
Just to be green, you would have to trade in a car that gets fewer mpg than the new one.

Interesting Link
http://unionleader.com/article.aspx?headline=Revolutionary+auto+already+on+the+road&articleId=1b081989-f67b-458e-8e42-913c8568fb36

Red HHR

(Quote)
Dave K. Says:
November 10th, 2008 at 12:52 am

hi D Lo #82,

“Dave K,
What’s the obsession with the EREV Cruze?”

________________________________
As I have mentioned in several prior posts…

At $38,000 the Volt will be popular, but is still a niche vehicle. Appealing more to the Corvette mentality. The Volt is bells n’ whistles heavy and streamlined to near bullet drag coefficient. And it is offered in a 4 door sedan only.

The EREV Cruze is offered in both small SUV and 4 door sedan. And has a standard knob and button control panel. The EREV Cruze with a smaller battery (300lbs @ 25-30 mile range) Could be mass produced and sold at Prius price level. This makes it a sure winner in the GM depository scenario. And also has broader appeal to a hungering world market. You can pack anything from your bicycle to several suitcases in the rear cargo area. And at a sticker of $8000 less, what could be better?

=D~

(Quote)
Sean O'Brien Says:
November 10th, 2008 at 7:27 am

Union pay is insane. I work in a plant with several hundred USW members. The guy who drives a golf cart around delivering parts makes $70,000 a year, plus killer benefits. Our office worker salaries are higher than average to stay in the ballpark, but still lower, especially as you gain more seniority.

If you’re a metal worker of any kind, you can basically write your own ticket right now.

(Quote)
statik Says:
November 10th, 2008 at 9:08 am

Deutsche Bank is out with a new call and price target on GM:

“Deutsche Bank views GM shares as worthless”

LONDON (MarketWatch) — Deutsche Bank downgraded General Motors Corp. to sell from hold, with a price target of $0…

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7b5BBC7AEE-1D84-40F6-95E2-241FB03C17EC%7d&siteid=yhoof2

For the first time ever, I say it is a buy (at $0)….provided you ask for the individual share certificates, good for starting fires and whatnot.

(Quote)
N Riley Says:
November 10th, 2008 at 11:00 am

If the congressional leaders are so “forward looking” as they seem to claim, why did they not address the auto industry directly when they passed the financial market 700 billion dollar bail-out? It was well known at that time. It had been know for months prior to all the financial market problems. It should have been addressed well before now, if it is going to be addressed at all.

(Quote)
jbfalaska Says:
November 10th, 2008 at 11:15 am

Kent Beuchert says – Sorry, Pelosi, but my tax dollars will not be used to pay off your union supporters by propping up the companies that they have destroyed.

Funny – for fifty years GM and union wages led to the greatest world strength of any nation. Still, believe what one may through the lens of politics. Fits right in with the campaign slogans of terrorist, un-American, and a host of other politically charged dogma.

So to union wages, I’m not sure what would be “fair” to pay auto workers. What I do know is less than 100 people in the banking system bailout are about to take CEO pay and benefits from our tax payer dollars after they squandered their firms into the ground. Less than a room full of people will reap $70,000,000,000.00 for the poorest performance in American and world history. That’s more pay than the 200,000 autoworkers combined made over the past three years. Egregious greed at the expense of patriotism to our own country is the true outrage of this post-Captains of Industry age. Defend CEO pay all day and for your lifetime as you may Kent. That kind of thinking is how we got here. Money of any kind apparently should always and only go to the top. Perhaps we can all do a sing-a-long praising Trickle Down Economics regardless of the failed practice. Even China announced a bailout – too we Americans? – of course not – infrastructure and working class wages is their belief, the same belief we once had when Capitalism of the 1970s was in motion. Something for everyone – remember those days?

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jbfalaska Says:
November 10th, 2008 at 11:21 am

My prayer is rather than pay $70,000,000,000.00 dollars to compensate a few princes of industry who failed beyond even the wildest of imagination; take that money and revive the auto industry where our country may benefit.

Another option is to put any one of the 200,000 union paid auto workers, including the janitor and put them in charge of GM or possibly the banks. Cheaper wages and probably just as effective. Maybe more so when they avoid the moronic use of derivatives done by this company in the hopes of making magic money for their personal bank accounts.

(Quote)
Red HHR Says:
November 10th, 2008 at 12:07 pm

Not only will the new regime bail out GM…
They will unionize Toyota and Honda. That should “level” the playing field. Of course the executives will lose their outlandish pay, I agree with jbf above. Statik may be right about chapter 11, however GM will still pay their union employees to produce automobiles. It is all sort of a new version of trickle down. It is just that the pond on the top will be drained. Really what is the alternative? A Cuban style economy where 50 year old cars are used as cabs?

Not sure how all this came about, I just wanted a Volt.

Red HHR (investing in mops, so when I have to repaint the car)

(Quote)
N Riley Says:
November 10th, 2008 at 12:25 pm

The pressure is too heavy for a bail-out for it to not be done. Not only will the automakers be bailed-out, but the unions will be to. The taxpayers are going to be paying for union health and retirement to the tune of many, many billions of dollars. We should insure that no auto executive makes more than a living wage with no bonuses or stock options. Union employees should be paid average union scale for all levels of wage earners in the U.S. It is not only the auto executives, but the lowly union member who caused the decline of American autos. Bad management, bad decisions and bad work ethics along with shoddy work contributed greatly to our problems. They should all suffer because of it.

Personally, I agree with Statik. Take chapter 11 and suffer the pain now. If not now, it will happen later unless Detroit has finally learned their lesson. Plus, we can’t completely blame the automakers for building large trucks and SUVs. We, the buying public, were demanding these types of vehicles. They only met customer demand.

(Quote)
N Riley Says:
November 10th, 2008 at 12:30 pm

The politics of this situation is such that we will be paying for bad political decisions along with bad management and bad workmanship for many years. The problem with all of this, not counting the untold billions of dollars of wasted taxpayer money, is that when it is all over, the same politicians and management will be in office. It is a sorry situation and there is not a damn thing any of us can do about it.

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DaveP Says:
November 10th, 2008 at 12:59 pm

Ooops, my (incredibly insightful message vanished into the moderation ether. In a nutshell, the feds just spent a huge amount of the money (somewhere between $65-90 billion, depending on how you work the numbers) that could have been used to bail out companies like GM.

What valuable company did they use it for? Why, our old buddies at AIG who apparently didn’t get enough the first time!!

http://tinyurl.com/5otnjf

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DaveP Says:
November 10th, 2008 at 1:02 pm

Either the website is broken or everyone’s tired of hearing from me. Third and last try. Big insurance company has taken a huge chunk of the money that could have otherwise been used for bailout loans to the automakers (This money came from the company pool, not the banking pool – they’re separate):

http://tinyurl.com/5otnjf

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Lance Says:
November 10th, 2008 at 6:22 pm

Enough of the handouts, the taxpayers can not continue to support this stupidity.

If you want to save American auto manufactures simply place a $5,000 tariff on imported autos. This will cause the buyer to look at GM, Ford and Chrysler products.

We do not need to keep handing out money

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Marlon Says:
November 10th, 2008 at 10:37 pm

If a bail out is the only good option, it would be necessary:

- Company pay cannot exceed $95K/year, including the CEO.
- CEO Wagoner must go.
- List portfolio of cars to be built. SUV, even hybrid of electrict is not acceptable at this time. I am looking to buy a compact car. From what I can tell, GM has only garbage cars. The only car which is promising is the Volt.

(Quote)

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