Grab our RSS Feed

AND

GM CEO Calls Chapter 11 Bankruptcy Filing a “Fantasy”

November 16th, 2008 | Posted in: Financial, Politics

This week is expected to bring a heated and fierce exchange in Washington, seemingly pitting Democrats against Republicans in one last gasp of the lame duck Congress.

The $25 billion automaker bailout bill will be presented on the Senate floor tomorrow morning. Today on the talk show circuit many Republicans were dooming it to failure. For example, Arizona Republican Sen. Jon Kyl said it was “pretty clear that it’s not going to pass.”

Michigan democratic Senator Levin said he would be willing to shake up the automaker’s management in exchange for getting the loans passed saying “I’d be happy to tell Rick Wagoner that he ought to consider resigning if that is the difference between getting this kind of support and not.”

GM CEO Rick Wagoner himself has previously indicated that GM didn’t have enough cash to last until Obama takes office on January 20th. It appears the only hope for GM to survive is a bridge loan before the end of the year

Today Wagoner tried to explain why the alternative option of GM filing bankruptcy wont work. He said “this idea that you just go into Chapter 11 and hang around for three months and agree to reduce your debt obligations and don’t pay your retirees, this is a fantasy. Most people will stop buying the cars of a bankrupt company.”

Source (Reuters)

Posted by: Lyle

121 Responses to “GM CEO Calls Chapter 11 Bankruptcy Filing a “Fantasy””

GLV Says:
November 16th, 2008 at 3:34 pm

Mr. Wagoner may not like it, but the current Congress lacks the votes to pass a bailout package for the Auto Industry. He better consider Ch11 while he still can or he’ll be forced to take Ch7…

(Quote)
Dick G. Says:
November 16th, 2008 at 3:35 pm

Electrification of the automobile is a $7.5 trillion industry. Supplying enough solar and wind energy to move these EV’s the first 40 miles each day is a $5 trillion industry. What could these 2 industries do for our economy? Republican or Democrate they better get it right!!

(Quote)
omnimoeish Says:
November 16th, 2008 at 3:47 pm

That’s funny that Wagoner can say they don’t have enough money to get through the next 90 days and in the same breath say that bankruptcy is a fantasy. That just goes to show you the “Uncle Same will bail me out” routine has gotten way too common.

Ok, so 80% of those surveyed say they would’nt buy a car from a company in bankruptcy, but people have already stopped buying cars. Although a lot of people can associate GM with Chevrolet, I don’t think most people realize that GM is the same as Buick and Pontiac etc. etc., I think most people will still buy the car they want and can afford.

(Quote)
Grant Says:
November 16th, 2008 at 3:52 pm

Well, to be honest, I really don’t know what to think on it.

I myself possibly WOULD buy a car from a company in trouble, if I thought I could still get third-party parts. After all, I know a great many people who still tool around in their Model-A’s (No joke! Very popular at our local Sonic on Fridays!) but it would have to be a case of a company with a rep for very high quality, despite their issues. Craftsman tools, for example.

I have no doubt next week will be critical.

(Quote)
Eric Says:
November 16th, 2008 at 3:52 pm

Fourth post!

Edit:
Ack! Fifth Post! :-p

(Quote)
Frank D Says:
November 16th, 2008 at 3:57 pm

Maybe now the Congress will have a real debate on the high cost of healthcare on the backs of business. If this country would use our resources on the people, rather them defending and politicizing oil, we would have a more sustainable and competitive auto industry/economy as a whole.

(Quote)
globi Says:
November 16th, 2008 at 3:57 pm

I find it odd, that many banks losing money, despite not investing in expensive R&D, tooling and factories, can easily get a bailout and if a company is an expert in vehicle engineering, design and production they’re supposed to be on their own.
Keep in mind, it’s comparitively easy to pop up service companies from scratch, but nobody will pop up a large vehicle industry from scratch.
If GM would go belly up, it’s gone and most probably won’t be replaced by some new, innovative American start up.

I don’t remember banks inventing electricity, vehicles, aircrafts, computers or freeing the world from the Nazis and I don’t see why and how particular failure-banks may help us getting any further

(Quote)
o.jeff Says:
November 16th, 2008 at 4:02 pm

Of course someone would buy all of the valuable parts and tooling as a part of the liquidation, which would mean parts would be available. Many other parts are made by third parties anyway.

Hey, how about the GM dealers kick in a couple billion? They’ve got a lot riding on this too.

In fact, I think there are probably many untapped sources of capital. GM just won’t use them until they have to. I bet there are a couple of billion in easy savings that they have not taken because they are waiting to see what happens in congress this week.

(Quote)
koz Says:
November 16th, 2008 at 4:08 pm

Mr. Wagoner should be locked in a room with his executives and UAW management drafting a “go forward into profitability” business plan that they can present to congess. Squawking for interviews and commenting that they are willing to accept whatever demands congress puts on them is not showing the proactive and agressive leadership that GM requires in their current situation. He and his executive team should have cut their compensation already and they should have reached revised agreements with the union, implementing the 2010 agreements immediately. If the do not present these, along with other “changes” in a detailed business plan this week, then they will not have done enough to deserve consideration for government assistance IMO.

(Quote)
Keith Says:
November 16th, 2008 at 4:23 pm

GM needs to wake up and smell the flowers , If GM cars are so good and just what the customers want , then why are there so many Japanese cars in the United States and Canada.

(Quote)
DonC Says:
November 16th, 2008 at 4:25 pm

You can’t definitely say whether people will buy cars from a bankrupt company. We don’t know because we’re in uncharted waters. My guess is that in the current climate it seems quite the stretch they would. But that’s just a guess. Of course you could just roll the dice like some Republicans want to, but my guess is that there will be enough Republicans who don’t want to be in a minority party for the next fifty years to pass a bill. A few have already blinked.

The conceptual problem the Republicans have is that they’ve already voted to spend the $700B. That’s a done deal. And now they’re hard put to it to explain why spending $150B on AIG is a great idea while spending $10B on GM is a terrible idea. What’s the difference?

It’s an especially tough case to make because it’s so obviously stupid. The reality is that you can’t have a stable financial system if you don’t have a stable housing market, which is the part that Paulson has finally figured out, as evidenced by his announced shift to helping consumers, The part the Republicans haven’t yet figured out is that you can’t have a stable housing market if you don’t have a manufacturing sector — a fixed home loan at 5% may be great but if you don’t have a job then it’s not going to keep you in your house.

This may be what you get when you let politicians build careers on issues like gay marriage. They’re just not intellectually equipped to deal with real problems when those come up.

(Quote)
sherry Says:
November 16th, 2008 at 4:56 pm

We must not as a nation forget the role the high cost of our dependence on foreign fuel played in the demise of our automakers. The exorbitant cost of gas the past year has done serious damage to our economy and society. We need to take lessons from our mistakes.WE also need to get out from under the grip our dependence on fore gin oil has on us. Why not take some of these billions and invest in America becoming energy independent. Driving an electric car would cost the equivalent of 60 cents a gallon. The electricity could be generated by solar or wind power. Green technology would create millions of badly needed new jobs. What America needs is a green revolution. It is time for us to move forward with alternative energy. I just read Jeff Wilson’s new book The Manhattan Project of 2009. I highly recommend this book to anyone who is concerned about the downward spiral of our economy and it’s effect on our society and would like to see our country become energy independent! http://www.themanhattanprojectof2009.com

(Quote)
Frank D Says:
November 16th, 2008 at 4:59 pm

If the Volt were available tomorrow, I would withdraw some of my savings and buy one. Either out right pay for it, or finance half, even if GM is on the verge of bankruptcy. My point is that this technology is a game changer for personal transportation. If the banks would encourage savings and pay a higher interest rate for secured deposits, They would start to become healthier and the consumer would have more buying power for what is more important. maybe by 2010, more individuals will have the buying power to purchase the Volt.

(Quote)
o.jeff Says:
November 16th, 2008 at 5:04 pm

Donc,
I agree with you, there is no difference: AIG should not have been bailed out either. Probably Freddie and Fannie were a little different because they were government-sponsored entities, but I would be aggressively shutting down these entities right now.

But I agree with you — if you favored the bailout of AIG, then you should definitely favor the much cheaper bailout of GM.

I believe we will soon come to a point where everyone realizes that no amount of bailing can support the nation’s entire economy. We are just going to have to get through these hard times however we can. To attempt to prop up our entire economy will bankrupt the US government or destroy the dollar or both, and that will truly be miserable.

(Quote)
RB Says:
November 16th, 2008 at 5:04 pm

I grow weary of hearing Mr. Wagoner explain the conditions under which the excellencies will accept money from the treasury.

(Quote)
RB Says:
November 16th, 2008 at 5:08 pm

#11 DonC said “The conceptual problem the Republicans have is that they’ve already voted to spend the $700B. ”
===========================================

As I recall, quite a few Dems voted for the $700B too, even more than Repus.
In any event, the election is over now; Dems are in charge.
If Dems favor auto bailouts, they have the power and can just do it.

(Quote)
Old Man Says:
November 16th, 2008 at 5:13 pm

I think this is one more good reason why bankruptcy will result in nearly no sales of G M cars. I fear that the only way the purchaser could get financing would be to pay at least half down. Think about it, the value of a car drops like a rock as soon as we drive them off the lot. After bankruptcy that drop would be much greater and the bank would not loan much under such circumstances.

(Quote)
Dave B Says:
November 16th, 2008 at 5:16 pm

Hey Rick: FORFEIT YOUR BONUS THIS YEAR. In fact I agree, resign. You didn’t earn it. As for the republicans, I’m registered as one but they sure as hell don’t represent what the party once did. That’s why we got hammered since 2006, and rightly so.

(Quote)
vincent Says:
November 16th, 2008 at 5:17 pm

Rick your a jerk. Go back to school.
If GM puts the same determination into making the illusion a Fantasy… into building great machines and marketing…they have a chance.

Rick Petsmart is looking for leadership…back to basics buddy.

Hire 12 of us from this site to take your place…many smart people here. We are only 1M annually each and don’t need a jet. Ditto on the bogus bonus! You dont deserve you salary either. You would have fired a weak performer such as yourself years ago. How are you still working for GM?????

(Quote)
statik Says:
November 16th, 2008 at 5:31 pm

Finally a post about GM’s health, enough ‘Volt specific/technical’ threads…just kidding.

Whether you are pro-bailout or not, you can’t say you won’t take just a little bit of happiness at Wagoner being forced to eat crow on this or getting the ouster.

Wagoner has painted his own demise here if the Dems can’t get the bailout pressed through…or another similar initiative. If it dies, what is Wagoner’s position? I really don’t know. He has the stance of ‘no way, no how it works in bankruptcy,’ so, how will he be able to make the case he is fit to lead if that scenario does indeed unfold? I don’t think he can. The only hiring at GM right now is ‘financial professionals,’ so that would lead us to believe they are looking past this event into bankruptcy options.

Regardless, he should realize that it is out of his hands at this point, and should be keeping a low profile (that goes for the UAW boss Gettelfinger too), nobody wants to hear from him…unless of course, he has finally worked out a business plan for GM after years of floundering aimlessly. That is kind of what CEOs are there for right? To give direction/leadership?

/I realize I have offered nothing to the discussion with my post, but I just thought I would comment anyway, it is the ‘weekend thing’ to do.

Side note: If you give me the option of a new car at $20,000 and a new car with a 60 day warranty for $18,500. I’ll take the no warranty car…no questions asked, everytime….whether the company is in C11 or I’m buying it from Toyota

(Quote)
Hal Says:
November 16th, 2008 at 5:37 pm

I fail to see the difference in the public mind between what is happening to GM now and an official bankruptcy filing.

Frankly, the longer this is protracted the worse it looks for the
survival of GM. The quicker into bankruptcy the quicker out.

—

An existing option is to setup a separate company for this
new technology with the current money provided.

Have the new company buy the needed plants, and resources
from GM to get started. Thereby providing some money for
the rest of GM.

This is all ‘brinkmanship’ for more government money and for
management to maintain control — BAD NEWS.

GM has some good technology and good engineers — really
bad management.

(Quote)
o.jeff Says:
November 16th, 2008 at 5:42 pm

CNN has an update at: http://money.cnn.com/2008/11/16/news/companies/auto_bailout_sunday.ap/index.htm?postversion=2008111615

The Senate bailout provision will be attached to a bill that extends unemployment compensation. I believe the extension of unemployment compensation is a good idea and will get a lot of votes.

The White House offered an alternative bill that would simply allow the already-approved 25B in loans to be used for more immediate purposes. This too seems like it would be an attractive way of selling the idea.

Sounds to me like this will pass. I am not optimistic that it will help, and I hope it is a one-shot deal.

(Quote)
Rashiid Amul Says:
November 16th, 2008 at 5:48 pm

I am so sick of this garbage.
Bail out, no bail out. Does GM really deserve blank check? No.
Does this world need the Volt? Yes.

Put me in charge. Wagoner will be the first to go.

(Quote)
vincent Says:
November 16th, 2008 at 5:50 pm

I’m sure it will pass.
The issue is what happens after they get the money???
Whats the plan. It better not have Ricky in it unless he is on the line spinning bolts.
100% agree Rashiid. We can do MUCH better.
We keep Uncle Bob (Lutz) Get Iacocca back and loose the union chumps.

(Quote)
DonC Says:
November 16th, 2008 at 5:54 pm

Though the issue has been mentioned previously, here’s the first article I’ve seen about the interconnections between suppliers and all the the manufacturers. This could be a very big problem going forward for all auto manufacturers, foreign as well as domestic.

http://news.yahoo.com/s/ap/20081116/ap_on_bi_ge/meltdown_auto_suppliers

The problem here is that Pauson is not moving fast enough to free up credit for business. It’s fine to stabilize the financial markets but credit is still not flowing and manufacturing is, consequently, at risk.

#16 RB – “As I recall, quite a few Dems voted for the $700B too, even more than Repus.”

Yes you’re right. But they’re not the ones opposing using some of the bailout money for manufacturing. (Nor are they the ones primarily responsible for this fiasco). Personally I’m not persuaded by the claim that the $700B for the AIGs of the world is a good thing but that using some of that money for manufacturers is a bad thing. It’s all part of the same ball of twine.

In this regard Pauson’s distinction between the two as one being “an investment” and one being “a bailout” is borderline moronic. Seems like preferred stock in a failing financial company is no more an investment than preferred stock in a failing manufacturer. Can you tell me what the difference is?

Finally, you’re right we have had an election but the old Congress is still in session and the Republicans hold enough seats to block the legislation. No problem there.

(Quote)
Xiaowei1 Says:
November 16th, 2008 at 5:57 pm

I’ve been reading these forums for some time now, also hoping to see the Vote come to market and save the fleeting GM company. I’m steadily coming to the conclusion we may see the Vote, but not from a company which has not sort bankruptcy protection.

The problem with investing in GM at this point (by the government- or from dealers as suggested above), is there looks to be almost no chance of a return on investment. You are pouring money down a bottomless well. As an investor, if GM claims bankruptcy you have just lost virtually any chance of seeing your money again. Why on earth would you be even tempted in investing in such a company?

Quite frankly, if a company can not survive for 90 days with the billions they still have, no amount of restructuring seems good enough. Current debts/commitments are just too high to facilitate any recovery in such a short amount of time.

Sorry to say, GM is in a world of hurt. Giving them 25 billion even with a wish list of limitations will just delay the inevitable for a year or so. They will most certainly be back asking for more, and this is no way to run a business. GM should simply have never reached such a poor state to begin with. How do you run a company so badly as to be losing billions a month? I can only say Management had little to no idea of how the world was evolving toward cars produced by their Japanese competitors.

(Quote)
Charlie H Says:
November 16th, 2008 at 6:06 pm

GM has inflexible manufacturing, an overdependence on trucks, “hybrids” that offer no advantage for extra thousands of dollars, “hybrids” that are also “gas guzzlers,” a reluctance to build good small cars and a “Hail Mary” play that’s consuming billions but will achieve no significant result (remember, GM’s PLAN is for 10K Volts in 2011 – that’s nothing in the auto buisiness).

A company like that NEEDS a chapter 11 and a full housecleaning of management.

Including “Uncle Bob (Lutz).” It beats me what people see in this guy; all he knows is muscle cars and the market for them is dead dead dead. He had been on board at GM for a couple of years and was sneering at the Prius in 2004. Lutz is anything but a visionary. I got a real kick out of his “Easter Bunny” comments; they revealed that the guy who was “personally supervising” the Volt project (his own words) knew NOTHING about the project. Cut him loose and cut GM’s losses.

GM is a mass market auto manufacturer. Any car that they produce must add to the bottom line in that context. The Volt will not do this.

I’ve given this advice before… it’s probably too late, now, for any advice to rescue them. Too bad, GM. See you in bankruptcy court.

(Quote)
Laura Says:
November 16th, 2008 at 6:08 pm

Ah, finally a post where we can start good arguments. Regarding the previous post, I was going to ask whether any of upcoming electrical vehicles (Tesla, Volt, etc) could be delivered with a manual transmission option.

I read an article today where Gordon Brown argued that a bailout for GM would constitute protectionism, and he would seek investigation with the WTO since he believes that is illegal. Exactly what I have been saying all the day long, but some people don’t get it.

(Quote)
Tony Gray Says:
November 16th, 2008 at 6:09 pm

From a 2001 Time Magazine Article:

A recent Yale Law Journal article called for junking Chapter 11 altogether and letting sick companies die. The authors studied 326 publicly traded firms that had filed bankruptcy petitions between 1964 and 1989 and found that only 20% had managed to emerge successfully. At the same time, the article said, bondholders lost 67% more of their investments on average when companies failed in Chapter 11 than under previous law. “If stock- and bondholders were worse off, what in the hell was going on here?” demands co-author Michael Bradley, a law and finance professor at the University of Michigan. “If the purpose of Chapter 11 was to protect corporate assets and shareholders, we found just the opposite.”

Like any hotly contested issue, Chapter 11 has its share of champions. “On balance, Chapter 11 has been positive for the economy,” says Edward Altman, a finance professor at New York University’s Stern School of Business. “It conserves the assets and values of firms that have temporary problems but can be rehabilitated.” Altman and doctoral student Edith Hotchkiss conducted a study that found that at least half the 1,096 firms entering Chapter 11 between 1979 and 1991 emerged successfully and have managed to stay out. That study focused exclusively on publicly held companies in Chapter 11.

(End of article cut).

As some have mentioned, most US Airlines have survived backruptcy, as has Macy’s, Texaco and the Days Inn Hotel chains.

(Quote)
Edwin Mang Says:
November 16th, 2008 at 6:16 pm

I think it would be very interesting to find out how a company burns through $200 Billion in six months and only has 2.5 Billion in losses in each Quarter . Plus Chapter 11 or 7 as a stock holder I will find out will I not ?

(Quote)
Tony Gray Says:
November 16th, 2008 at 6:34 pm

Edwin #30: If you are a common stock holder, you stand a good chance of losing just about everything regardless of the Chapter used. KMart, when it filed some years ago, basically invalidated its old common stock and issued new paper. I don’t know if GM does (or did) issue preferred stock.

Even if they don’t go CH 7/11, a Government assistance package will undoubtedly place the US in first position as it comes to payback, meaning that even if your stock does retain some value, it won’t give any dividends for a while and probably won’t see the lofty values of the past for quite some time, if ever.

(Quote)
rickj Says:
November 16th, 2008 at 6:34 pm

So GM will get part of $25 billion. Which $25 billion (retooling loans or the bailout funds) is a non-issue. However, GM will be back shortly after inauguration desperately asking for more. We all know that they won’t get more. GM knows. So what are their motives for deffering the inevitable? Anyone?

(Quote)
Edwin Mang Says:
November 16th, 2008 at 6:41 pm

I have an intrest in the new $150 Billion resurch center that you just set up and how it looks compared to the $50 Billion one you set up 10 years ago .

(Quote)
koz Says:
November 16th, 2008 at 7:06 pm

I have favored some form of government assistance for a long time now and vocalized this, but I don’t posses nearly enough information to make a decision. I don’t understand how anyone is informed enough at this point to make a well reasoned decision. This is why it’s so frustrating to see poticians and others with such strong positions for and against it at this point. How can so many people be blindly for a bailout and so many deadfast against it? This is not what should be wished for in leadership. Especially in the difficult times we are currently in, pre-conceptions and ideology need to take a back seat to good reason.

(Quote)
Dave B Says:
November 16th, 2008 at 7:24 pm

Laura @ 28,

If you think China and even Japan do not contribute to their auto manufacturers or production in general, you are sorely mistaken. The celebrated Prius was developed by Japanese government dollars–so why not do the same here? If you ask me, it is only fair in the eye of the WTO (worthless orginization) IMO.

(Quote)
Old Man Says:
November 16th, 2008 at 7:28 pm

Completely off thread.
I thought dealerships were like commision sales organizations. If so, how are they a drag on the builder? Or is a large percentage of them company owned? Or do they get a monthly fee for being there. These are serious questions and not smart a** remarks.
I hope someone will enlighten me.
Thanks

(Quote)
jbfalaska Says:
November 16th, 2008 at 7:46 pm

Absolutely keep so vital an industry an American industry. Reflect fully on the idea of an entire colossal industry as automobile manufacturing and all the spinoff money and manufacturing dependent on GM, Ford, Chrysler. $25 billion is cheap. $100 billion would be cheap. Today, Henry Paulsen, without Congress, passed another bank tax relief provision giving the banks another $140 billion atop the $700 billion approved. Now how is that for executive fiat.

Congress, hopefully will step in and help the industry that helps mainstreet more than glass towers and citadels.

(Quote)
texas Says:
November 16th, 2008 at 7:59 pm

I respect Mr. Wagoner but I don’t get his fantasy. Who is saying 3 months? A bankruptcy will take about 3 years (for a company the size of GM and the amount of restructuring that needs to get done).

I would like everyone to think back to WWII. Do you really think GM can’t just stop and do a 180 if the situation calls for it? They completely stopped producing cars and started producing tanks and other military items. Then when the war was over they switched back and started producing cars again. This was an enormous task and shows what us Americans can do if we have to. Well, we now have to. It’s time for a WWII like reorganization. Only, instead of making tanks we need to electrify the automobile. Nobody need the Hummer and SUV capacity anymore. It is not only irresponsible to use these huge wastes of fossil resources but it’s keeps America on the wrong path. We need to move towards a time when we have a renewable and sustainable energy policy.

I wish I could stress to people that we are at a real turning point right now. Do we continue as is or do a wartime 180. I say we do a wartime 180. That includes many things like getting back to the constitution, rethinking how we are going to treat U.S. citizens (are we going to treat them like valuable resources that deserve to be developed or simply ignore and discard them), how are we going to mix our capitalism and socialism structures to best move us forward as a nation that will be competitive in the new global environment.

Our country right now is a mix of poorly thought out and managed systems that have long needed to be cleaned up. Now is the time. Humans need massive environmental change in order to come together and adapt. We can all agree that now is the time to change. We can all see it and know that the old ways of doing things are not going to be good enough. Sure we can limp along because we have such influence in the world (mostly because we consume so much) but soon countries are not going to be loaning us as much money (or not at all). We are like junkies that are getting to the point where they can’t pay for their drugs. This is truly where we are. To deny this is to doom our future. It’s time to clean up our act, get some help, make some huge changes, work hard and move forward.

We have such promise and our infrastructure and natural resources give us an advantage over just about any other nation. Sure we have our disadvantages too but making things happen is not one of those disadvantages. Once Americans have a good plan and are committed we are almost unstoppable. The world knows this and respects this even if they won’t admit it. Our childlike enthusiasm and drive can be an overpowering force. Let’s however take the time to draw up a great plan so that we are all moving in the best direction. A direction where we look to have a renewable and sustainable use the world’s resources and one where we look to fully utilize our human resources and to treat each other like we would like to be treated. This would be a great starting point. Anything other than that would be putting us on a less effective path. Let’s start with the basics – our constitution, basic business strategies, sustainable living strategies and treating people well. Everything on top of that solid foundation will be building towards a very bright future. It’s not going to be easy or comfortable at first but soon it will be something we all take for granted and wonder how we lived without such basic strategies.

I see the world going in one of three paths. 1) limping along for decades with no real changes until we are forced to change. 2) A spiraling downward as we all grasp the last straws of the fossil fuel era. 3) The next revolution where we harness our resources for a sustainable living and also gain a new respect for life.

I vote no for a bail-out and yes to a 180 degree reorganization. Now is the time to trust our constitution and get back to basics an prepare ourselves for a new era. It’s going to be a tough but rewarding challenge.

Oh and about people not buying GM? Well, if the government and GM are very public about their reorganization plans and commitment to bringing GM back as not only a world class enterprise but as the pride of our fleet then people will not be afraid to buy a GM car in the interim. If however the government and GM are secretive, elusive, and noncommittal then yes, people will not buy GM’s cars. Why would they? Also, when people say a bankruptcy is a disaster I have to wonder if they are paying attention. It already IS a disaster. A worse disaster would be to continue on the same path. It’s only going to delay necessary action for a few more years at best. It will be a money pit that will eventually have to be torn down and rebuild. Let’s do it now and take the lead.

(Quote)
kert Says:
November 16th, 2008 at 8:02 pm

The reality is that you can’t have a stable financial system if you don’t have a stable housing market,
Er, you cant have a stable financial system if your underlying monetary system is inherently unstable, you wanted to say ? Look up fractional reserve banking, commercial debt-generated money and trillions of dollars of deficit.
Then try figure out who is in debt to whom and who owns the money in this system.

(Quote)
Dave K. Says:
November 16th, 2008 at 8:02 pm

I don’t like CEO Wagoners “fantasy” comment. And Congress won’t like it either. This unyielding attitude will result in a restructuring.

I had a bad feeling when GM announced that it will go to Korea for the Volt battery. At least 1/3 of the Volt will come from Asia. And news is that 1/2 of the Volt production will occur over seas.

A123 makes a great American product. It’s the newest and the best battery technology available. One answer to this GM/TARP bind is for the government to support a marriage between the Volt and A123.

A123 will go public with their stock soon (symbol: AONE). The EREV program is part of President elect Obama’s energy independence plan. It will live on and be part of the rebuilding of America. I hope the government places an order for many EREV vehicles for Federal and State use. And that all the Volt parts are made in America.

=D~

(Quote)
jbfalaska Says:
November 16th, 2008 at 8:18 pm

A123 product is 100% made in China. Communists are in control of the lithium supply for A123 products, manufacturing of their products, and can cripple or open up supply at will once the concrete is poured for the ongoing control of battery technology. A123 will be pushed aside by the cronies there just as every other industry has faced from IT, to software, banking, – just take a look at the GM Chinese alliance. The GM model rolls off the lines as a copy cat product before the GM product rolls out. Take a look at the NEC situation. The entire NEC company, product lines and all were copied by Chinese government cronies. China routinely takes American companies and our government to AMERICAN courts. We can be taken to court for trade deals, the Chinese cannot – they ignore any international standards in contracting practices. Piracy is everywhere there and condoned at all levels.

The LG Chem deal was much better for GM and American workers from a much more reliable country that honors contracts. GM did offer partnering with companies willing to build here in the US with American workers. A123 declined.

(Quote)
RB Says:
November 16th, 2008 at 8:22 pm

#25 DonC says
In this regard Pauson’s distinction between the two as one being “an investment” and one being “a bailout” is borderline moronic. Seems like preferred stock in a failing financial company is no more an investment than preferred stock in a failing manufacturer. Can you tell me what the difference is?
=================================================

There’s a clear difference between financial companies like banks and manufacturing companies. They argue that AIG is a financial company and thus covered under the $700B bailout bill. To me that is a stretch, but it is true that AiG holds a lot of annuities, insurance contracts and other financial instruments. In any event, at this time the Treasury has effectively nationalized AIG. That is, the Treasury through its appointees now controls and directs AIG.

Do you advocate the Treasury effectively nationalizing GM in the same way as AIG?

The $700B bailout bill was intended to stabilize financial companies, not industrial companies, and it seems to me that GM is not a financial company even with maximum stretching of what that means, though possibly GMAC is. However, I don’t doubt that Dems can push through any definition they wish to, and will.

(Quote)
Arch Says:
November 16th, 2008 at 8:26 pm

I love this MESS! I hope more of you come to understand it!

Take Care
Arch

(Quote)
Dave K. Says:
November 16th, 2008 at 8:29 pm

hi jbfalaska #41,

“The LG Chem deal was much better for GM and American workers from a much more reliable country that honors contracts.”

_________________________________

Does LG Chem make a better battery?

A123 Systems is based in Watertown Massachusetts. LG Chemical, is the largest chemical company in Korea and is headquartered in Seoul, South Korea.

_______________________________________

hi RB # 42,

I have paid $5000 in premiums to AIG over the last 5 years. I have filed no claims.

=D~

(Quote)
bgavin99 Says:
November 16th, 2008 at 8:37 pm

I agree with Texas. I signed up with GM and its Volt because I believed they had the capacity to design and manufacture an electric car in huge volumes, just as they made tanks.
As an aside, we get terribly bogged down with “isms”
Socialism, repubicanism, capitalism, nationalism, they are all just slogans that stop us having to listen and think.

Now, about those tanks….

(Quote)
Dave K. Says:
November 16th, 2008 at 8:45 pm

hi Xiaowei1 #26,

“pouring money down a bottomless well”

__________________________________

My thought on GM stock is that the price has been supported by misleading claims for quite a while. Just a month ago GM stock was at $6 with periodic spikes to $7. The public had believed that the factory start up costs of the prior quarter along with the closing of SUV production would result in perhaps a $1 billion loss for the quarter. This is not a good number, but it would show improvement.

If GM does get a $25 billion “loan”. And if GM turns things around and prospers. Then each quarterly report from now until 2035 will have an asterisk on it.

*quarterly results reflect a $1 billion loan payment.

=D~

(Quote)
RB Says:
November 16th, 2008 at 9:13 pm

#44 Dave K said
hi RB # 42,
I have paid $5000 in premiums to AIG over the last 5 years. I have filed no claims.
=====================================

It looks like they will be there if you need to file one.
They may be able to send your tax money back to you

(Quote)
statik Says:
November 16th, 2008 at 9:17 pm

Random quote(s) from this afternoon about Wagoner:

WASHINGTON — Michigan Sen. Carl Levin said Sunday the top executives of Detroit’s Big Three automakers should consider resigning if necessary to convince Congress to quickly pass up to $25 billion in emergency loans for the struggling companies.

“I’d be happy to tell (GM CEO) Rick Wagoner that he ought to consider resigning if that is the difference between getting this kind of support and not,” Levin said

Wagoner, who has been CEO since 2000, has come under increasing pressure. Since 2004, GM has lost more than $70 billion, including more than $20 billion this year. He told Automotive News earlier this week that he has no plans to resign.
—
“Get rid of the management. Get rid of the boards — the people who brought them to where they are today. ” — Sen. Richard Shelby, who is the ranking member of the Senate Banking Committee

http://www.detnews.com/apps/pbcs.dll/article?AID=/20081116/AUTO01/811160309/1148

——————-

Even in such trying times, articles and quotes like this make me smile.

(Quote)
Morgan Says:
November 16th, 2008 at 9:17 pm

38 Texas:

I like the cut of your jib.

I have posted this before on other websites and was told I was trolling. I have said the same thing to those who have worked or dealt with GM all their lives including a couple retirees and they thought it was a great idea.

No more half measures. If we are going to do this thing with the automakers we need to do it right and recognize that we can kill two or three birds with one stone.

1) Government assumes all GM’s legacy cost and guarantees its long term debt (200 Billion)

2) The Government “negotiates” with the holders of Nanosolar’s tech, windmill turbines, and other patent holders for Domestic use and licensing. Directs DARPA and other engineering arms of the US government to work with GM/Chrysler/Ford on retooling ALL shuttered and mothballed plant facilities and assembly lines and retool them to produce solar panels, wind turbines, and any other promising tech that is reaching maturation in the Government labs (Los Alamos, DARPA, etc) The government uses our newly nationalized banks to issue the loans for GM/Chrysler/Ford to retool the plants.

3) The government issues a 800 billion to 1 trillion purchase order to the Big 3 for solar panels and wind turbines ensuring them cash flow and time to really charge out the Volts and EREV vehicles (GM has to give up the tech to Ford and Chrysler)

Detroit won us two world wars and dominated the automotive world. It is time to unleash the manufacturing capacity of these giants to solve our problems not small venture capital firms like Nanosolar or the wind startups. It is a unique opportunity for all of us and our country that our companies who have the largest manufacturing capacity and ability to coordinate production capacities on a global scale find themselves with their backs to the wall at just the moment our country NEEDS their production capacity to solve our energy needs and our energy security.

(Quote)
The Grump Says:
November 16th, 2008 at 9:35 pm

Get yer “Dick Wagoner Sucks” t-shirts, pitchforks, and flaming torches here, folks. No pushing please, there’s enough for everybody ! Get yer nylon rope, strong enough to hold the weight of any GM executive, no matter how fat. Step right up ! Hooray for Michigan Sen. Carl Levin – he gets a free t-shirt.
————————————————————
It’s so nice to see “Dick” Wagoner just being himself, for everyone to see. I have never seen such agreement on a single issue here, and I was here during the “great hydrogen fuel cell” debate some months ago. Rick Wagoner MUST GO, or no deal.

Reminds me of a story. 65 million (10) years ago, vegetation (gasoline) was plentiful. Dinosaurs (SUVs) roamed the planet, and the bigger the dinosaur (SUV) the better. Then something happened. A meteor slammed into the Earth (high gas prices), and deprived of food (gasoline), the huge dinosaurs (SUVs) died out. A very few of the lifeforms (cars) on the planet survived by adapting to the harsher enviroment, and evolved.

Rick Wagoner is a dinosaur, a remnant of a bygone era where money flowed like Niagara Falls. No benefit package was too high for a UAW member employee who screws on lug nuts all day – GM can afford it. — Or at least they could, in the age of the dinosaurs.

Feel the cold chill ? It’s the new reality, the harsher enviroment all companies have to deal with. GM cannot insulate its employees from the cold, cold world anymore – it has gone broke trying to keep the UAW cozy and warm. GM cannot evolve to meet the new reality of today’s business climate with dinosaur-brains like Rick Wagoner in charge, and GM really, really needs to evolve.

The UAW and Rick Wagoner are two of the problems GM must solve. They should not be part of the solution – if you throw dirty water into clean water, you get … dirty water ! GM needs a CEO who is not beholden to the UAW, and is smart enough to adapt GM to be more like Toyota and Honda. Toyota and Honda are more popular than GM, and the new CEO must be able to find out why, and adapt GM to their standards.

Any yahoo can wrap themselves in the American flag and yell “Patroitism !”, and / or insult the foreign car buyers – many posters here have done just that. GM’s new CEO must be smart enough to evolve GM to the next level, and not play the blame game. “Ohh boo hoo, americans won’t give GM a chance by buying our cars, so give us bailout money, so we can make even more low mileage cars people won’t buy.” Sorry Rick, but clear out your desk, pack your golden parachute, and leave. You are not needed at GM anymore.

(Quote)
NZDavid Says:
November 16th, 2008 at 9:38 pm

OK Rick, have it your way, it’s a fantasy. See you in C7.

At least you will have plenty of time for the new movie.
Who killed the American car industry?

/Drips with sarcasm.

(Quote)
Schmeltz Says:
November 16th, 2008 at 9:49 pm

Just wondering what other people are thinking here about this:

If Rick Wagoner does/should/could go, who do you feel should run the Company instead? Fritz Henderson? Bob Lutz? Barack Obama? Someone else?

(Quote)
GXT Says:
November 16th, 2008 at 9:58 pm

What a horribly misleading article title. I understand you don’t work for GM Lyle, but if you keep spinning things like that then you have a bright future with them.

(Quote)
koz Says:
November 16th, 2008 at 10:10 pm

“So my hope is that over the course of the next week, between the White House and Congress, the discussions are shaped around providing assistance but making sure that that assistance is conditioned on labor, management, suppliers, lenders, all of the stakeholders coming together with a plan — what does a sustainable U.S. auto industry look like?” Obama said. “So that we are creating a bridge loan to somewhere as opposed to a bridge loan to nowhere. And that’s I think what you haven’t yet seen.” – Barak Obama on 60 Minutes tonight

Well reasoned thought in Washington, well not yet anyway, but soon. We been debating here about Ch11 vs Gov assitance without Ch11 or Ch 7. The way I see it, is it’s Gov assistance (with or without Ch7) or Ch7. I just don’t see any way Ch11 works without Gov assistance. So in my pea brain, it’s whether massive changes can be best made with or without Ch11. My experience, admittedly very limited, with Ch11 is that it would be extremely cumbersome and costly in addition to the supplier risks and sales risks. While Wagoner’s comments about nobody being willing to buy from a auto manufacturer in bankruptcy are mindless exaggeration, other comments that it would have no effect on sales are equally without reason. Ch11 will, IMO, be far more costly and painful than the stakeholders reaching agreements that effect the same substantive change on their own. I believe everyone now sees the handwriting on the wall and are willing to compromise. The question is: are they willing to compromise enough? Big question and obviously cannot be answered here. I think part of the “re-organization” must include new leadership and ownership. Currently, there is no net value to the company. Can the stockholders be legally disposed of outside of bankruptcy? If the leadership is thrown out, who would run the company?

(Quote)
Canuk Says:
November 16th, 2008 at 10:11 pm

I can’t help but wonder; even if GM is given the paultry sum of 25 billion, what’s gonna change?! It’s only going to hold them for a few more months, and they still won’t have any desired product to sell in sufficient numbers to change anything. Possibly, like Statik is saying, 200 billion to erase thier debt and give them time to get new product… but, otherwise, isn’t it just throwing good money after bad?

Now, I hear our Finance Minister is going to Washington this week to hear the big three pleas for money and possibly handing over a bunch. This, at a time when the big three are sytematically pulling thier operations out of Canada to relocate in Mexico and China, despite all the tax money we’ve handed them. Geezz.. I guess they want just to milk a little more from us suckers. All I’d like to say, is that the big three had better be very repentant and have an honest, verifiable plan to turn themselves around for good, or no more money form us.

(Quote)
koz Says:
November 16th, 2008 at 10:12 pm

Schmeltz #52

great minds

(Quote)
Laura Says:
November 16th, 2008 at 10:13 pm

Regarding the proposed executive salary reduction, you see that is not easy to accomplish it:

Imagine Mr. Wagoner resigns – and chances are that may happen at anytime. A New top notch CEO, paid at market rate, would have to be selected. With the new CEO, he would likely bring other executives, who ultimately would also come only at very competitive salaries.

So you see right there how challenging it is for the government to regulate operational expenses in this situation?

(Quote)
Laura Says:
November 16th, 2008 at 10:16 pm

Dave B, #35:

Why the US did not seek WTO on that?
How much Japanese tax payer money was given to Toyota to get the Prius developed?

Thanks.

(Quote)
Paul-R Says:
November 16th, 2008 at 10:33 pm

Static stated…

“Side note: If you give me the option of a new car at $20,000 and a new car with a 60 day warranty for $18,500. I’ll take the no warranty car…no questions asked, everytime….whether the company is in C11 or I’m buying it from Toyota”

Sounds reasonable for a Cobalt or Camry, but I don’t believe this simple choice applies to the Volt. If GM goes belly up in three years, the Volt will not just be a car without a warranty … it will be a car that cannot be serviced for repair anywhere.

(Quote)
koz Says:
November 16th, 2008 at 10:38 pm

Laura #57,

I think that is part, admittedly only a small part, of the reasoning that has gotten them into this mess. This notion is common in today’s large business psyche that only highly priced and recognizable CEO’s are capable of running large corporations. Finding a CEO is similar to finding any other employee, except the available pool is much smaller and the vetting process is more extensive. In the end, though, it is just as much of a crap shoot, but the stakes are much higher. There should be plenty of experienced, capable candidates with enough confidence in their abilities to take the job at relatively meager guaranteed pay and earn the rest. I don’t have much confidence that the same GM board will pick the right person, however. They are just as culpable and maybe moreso than Wagoner.

(Quote)
Morgan Says:
November 16th, 2008 at 10:39 pm

58 Laura:

If you follow the WTO and I have a little bit. It is run mostly like a pure Democracy. I.E. Two wolves and a sheep voting on what to have for dinner. Everyone wants to sell into the US…nobody wants our products to enter their country. In short…the US is the sheep in that analogy.

I believe the only WTO case we won against Japan was the produce claim we made where they didn’t want to import our produce so their government left it on the container ships pending ” customs inspection” until it rotted. To be honest I am not even sure if we won the WTO case or threatened trade sanctions to solve the issue.

I believe the issue with Japanese government “assistance” is that it is buried in their Universities. For instance: Imagine Argonne or Los Alamos developed a killer battery tech under a government funded research grant. This discovery is published in journals but not really advertised. Then the Government offers it for exclusive license to GM for manufacture and use. GM jumps on it knowing the government provided the research grant for their ultimate benefit to begin with and offers a low licensing fee which the government immediately accepts and agrees to exclusivity.

Boom, you have a high level of government assistance and you place the tech with the company you were developing it for to begin with, legally and WTO free.

That is not even getting into the flat out copying Toyota and Honda did in the 70’s and 80’s or even today (the Hybrid Synergy drive is a revised copy of a similar system prototyped by another manufacturer)

(Quote)
statik Says:
November 16th, 2008 at 10:44 pm

#52 Schmeltz

Just wondering what other people are thinking here about this:

If Rick Wagoner does/should/could go, who do you feel should run the Company instead? Fritz Henderson? Bob Lutz? Barack Obama? Someone else?
———————————–
I’ve said this more than a few times over the past year and a half here, but Fritz Henderson should have been running this company all this time. He is a smart guy and has the proper background, understanding of how to get the job done as well as can be expected in this climate. (I’m not saying he is the savior at this point, or he could have avoided this mess…but I’m certain GM would be a lot farther away from bankruptcy at this point than they find themselves, certainly well into the Obama years).

Freed from Wagoner and the tyrannical board, I think he is the right choice…he understands GM’s business intimately and he (unlike Wagoner) can make the hard decisions and formulate coherent plans for the future.

(Quote)
Laura Says:
November 16th, 2008 at 10:53 pm

Koz #60:

You would need a leader with proven experience to save GM. Usually these people comes from other organizations, in which thaven been making millons a year. I am sorry but I doubt you would be getting a CEO from nowhere to fix this mess.

(Quote)
statik Says:
November 16th, 2008 at 10:54 pm

#59 Paul-R

Static stated…

“Side note: If you give me the option of a new car at $20,000 and a new car with a 60 day warranty for $18,500. I’ll take the no warranty car…no questions asked, everytime….whether the company is in C11 or I’m buying it from Toyota”

Sounds reasonable for a Cobalt or Camry, but I don’t believe this simple choice applies to the Volt. If GM goes belly up in three years, the Volt will not just be a car without a warranty … it will be a car that cannot be serviced for repair anywhere.
——————–

You are right, makes zero sense for the Volt. Even in this bailout (forget bankruptcy) that is a serious question. GM’s status gives serious pause to people thinking about buying/ordering this car.

When people asked about conditions for survival, I hesitantly voiced the ever popular, ’scrap the Volt program’ Survival of GM and the Volt program are mutually exclusive goals…the Volt may be a decade of losing money away from turning a profit. GM can’t spend a billion dollars just getting the first one pushed out the doors.

I want the Volt in my driveway, but GM is not the company that should/can bring it to market. They would be better served (on a purely fiscal basis) of letting the other auto manufacturers take the hit on building the battery infrastructure and developing the tech…then copying it.

The only way it works is if the US government decides they want the Volt and they defacto fund it through this bailout. In that case the name says Chevy Volt, but it is a US Government Volt in reality.

Bankruptcy or not, the Volt has a serious issue of consumer confidence in GM’s ability to be around to honor a 10 year warranty.

Even now, customers mentality has changed. I myself personally changed my ‘Volt waiting list information’ a little while ago, which reflects that:

“If you would consider giving a deposit for your Volt, how much would it be? (in USD):”

I changed my answer from $10,000 to $300.

(Quote)
fishmahn Says:
November 16th, 2008 at 10:58 pm

I stopped reading this exchange at # 17. More rehashing of the same points as far as I can tell.

There seems to be a lot of uncertainty, questions and even misunderstandings on bankruptcy. As a little background – I wasn’t involved in a billion-dollar bankruptcy, just a $25mil+ company going into bankruptcy. We were a graphic arts/catalog production company (we designed, took photos and laid out pages for catalogs/flyers/anything in print – including Sears, Wards, Penny’s, Dillards, Macy’s, Spiegel, and many, many others over the years) I was the Asst. Controller and I.T. Manager. At the time we had something over 250 employees. Filed bankruptcy (ch 11) and laid off 33%. In the 2 years we were under ch 11, we further shrunk down to 50 employees. This was 1994-1996. Some bullet points:

– at that time 83% of companies that file Ch 11, fail and become ch. 7. I bet the rate today is even worse.

– our business was over 20mil annually on the day we filed, within 90 days we lost more than half of our customers, many with catalogs in the works. Customers don’t deal with companies in bankruptcy. Getting new clients was nigh on impossible. Our ‘relationship’ with any individual catalog/project was 90-120 days start to finish. They still ran from us like we were the plague in spite of assurances from the bank, our receivers and the courts that we would be around to finish their projects. (whereas the relationship with GM when you buy a new car will be for at least 3 years… – you have a warranty after all – once our film was sent to the printer, we were done with our clients)

– They day we filed bankruptcy, we could no longer deal with about 75% of our vendors. Any outstanding payables (from office supplies to rent to raw materials) suddenly become ‘protected’ and we were not allowed to pay them without the judge’s approval. And getting that was like pulling teeth. That caused several of our vendors to go out of business because we were their major source of income. (think about that – GM suddenly being unable to pay last month’s bills for almost everything – a billion dollars + worth of sheetmetal, engine control computers, alternators, batteries, tires, etc. What will that do to AC Delco, Delphi, steel manufacturers, etc.? Hypothetically, would LG continue to supply GM with Volt batteries if they are not allowed to be paid for that last batch of 5000 batteries @ $10k each? Probably not…)

– IF (and that’s a BIG IF) you have a bank that is willing to work with you and provide funding to help you emerge from ch11, there will almost definitely be onerous and almost impossible to hit conditions. Things like cash in the bank has to be kept ridiculously high, missing a single sales goal can have drastic consequences, etc. I can’t even remember most of the conditions.

Oh, and for those who think ‘GM has friends in high places in banks – it won’t be that bad’. Our owner was personal friends with high-level executives at the bank (Dai-Ichi Kangyo bank) – they were all in the interment camps for Japanese-americans during WW2 together… And many of you know how loyal the Japanese are to ‘one of their own’. The bank will likely make it next to impossible for GM to continue to operate.

Oh, and that company was one of the 83%, even though we were profitable every quarter since filing. We should have been allowed to survive, but it doesn’t work that way in corporate bankruptcy. It’s not a clean slate like personal bankuptcy.

As for GM, Wagonner is right, bankruptcy is not an option. If they file ch11, I’ll wager any amount of $ that that will be the end of GM. It may take a couple years, but I’m certain of it. They’ll be in Ch7 – possibly before the first Volts are built.

Bailout? With the right conditions (our gov’t is incapable of demanding the right conditions) I’m for it. With the wrong conditions (the way it will end up being) it will take over $100B. With the right ones, it would likely be under $50B. I haven’t looked at their balance sheet, so I could be all wet, but that’s my ‘educated WAG’.

I guess if you made it this far, you weren’t put to sleep by my ramblings… So I’ll quit now. If I think of any more things (it’s been 12+ years) I may post them, if people really need more convincing. Though maybe I won’t, since, well, it’s just my opinion but, if I haven’t convinced you yet, you’re not going to be convinced, even when it happens in your face.

(Quote)
Tom Lee Says:
November 16th, 2008 at 11:10 pm

I am afraid that this talks of potential brankruptcy will hurt GM so badly that will not even need to file CH11 anymore; they will go directly to CH7.

The Government does not have the expertise and oversight capability to manage a car company effectively. Not even Mercedes-Benz could make Chrysler profitable and walked away from that.

Who in the world is going to buy a GM car knowing all these talks are going on? Maybe GM can still do fine overseas, but that is about it. Here I am afraid GM is already doomed with or without bailout.

(Quote)
statik Says:
November 16th, 2008 at 11:22 pm

I’m going to bring this up seperately becuase I think it has merit when talking about the consumer’s hesitation to buy from a company that might go bankrupt or is in bankruptcy, but is in the same vein.

GM’s problem is actually not so much the consumer at this point and their perception of GM’s viability. Their problem is the dealers themselves, and the problem has been in full bloom since November 7th.

Now here is the latest new twist. Since the Q3 dropped, and with it the reality that GM could be done in mere weeks, the dealers have gone from little interest in buying new inventory to absolutely none. (Compounded by the new GMAC terms of 5%/month payments and balance due in 180 days…or being cut off completely)

The only orders GM are getting since November 7th, are if the customer themselves are placing it. Why on earth would a dealer consider ordering anything right now with the fact that GM HQ is under a month’s worth of cash left in the kitty? The dealers have all frozen up and taken a ‘lets wait and see’ attitude.

I have a feeling if you thought October’s -45% sales figure was bad…November is assuredly going to be worse, with December in full paralysis mode as the lack of orders invade the system. I think that is why we seen those massive ‘temporary’ plant shut downs in the new year (10 plants in total at the time last week…another couple added since) and probably many more regardless if they get his bailout or not. The cash burn must be off the chart right now.

The forward looking prognosis for 2009 is actually much, much worse than the ‘we look for our auto business to be flat in ‘09, then a slight rebound in 2010′ speech that Wagoner has been pushing lately. The problems are already compounding on itself.

List of early ‘09 shutdowns/indefinite lay offs:
http://www.idga.org/News.aspx?id=123155734&IQ=automotive

(Quote)
DonC Says:
November 16th, 2008 at 11:29 pm

If you want GM to change, then, if you have a Democratic representative, contact them and tell them to dump Dingell from his chairmanship. After New Gingrich he’s the number one reason the auto makers are in this mess. Henry Waxman is aiming to replace him, and, whatever you may think of Waxman, he’s not married to GM, much to his credit. With Dingell at the controls change will come with great difficulty.

#42 RB – “The $700B bailout bill was intended to stabilize financial companies, not industrial companies.”

This is a moronic argument. Assuming GMAC is not a financial institution, which it obviously is, the bigger issue is that this hardly argues against CHANGING the bailout to include manufacturing.

Paulson says he changed the bailout and won’t apologize for that because the facts changed. Not only has he jettisoned the idea of buying assets, which is what the bill is designed for, he says he’s now looking to support institutions which would not traditionally be considered financial. So if he can change his mind and make things up why can’t Congress — which has the actual and real authority to make these decisions — change what the bailout covers. Arguing that Congress can’t change the bailout to include manufacturing because that was not a part of the original bill is a mindless tautological argument that makes absolutely no sense whatsoever, other than of course revealing that Paulson is a finance guy who cares not one whit about manufacturing.

(Quote)
DonC Says:
November 16th, 2008 at 11:40 pm

#65 fishmahn & #67 statik

Yup, bankruptcy is not pretty. Everyone stands around and waits for the next development, and as that happens everything goes to hell.

It’s either sad, amusing, infuriating, or all three to watch how many representatives, most of whom are overly willing to wrap themselves in the flag and call themselves patriots, are happy and willing to spend a trillion dollars on a brain dead war but would rather watch their country go down the tubes than spend that much to save it.

(Quote)
NZDavid Says:
November 17th, 2008 at 12:00 am

67 Statik

Yes, I was thinking along the same lines, If you would not buy from a company in receivership, why on earth would you buy from a company you expected to go into receivership.

At this point, with release of the November figures, it will become a self fulling prophecy.

I think the government should take over the E-rev program and license the technology, essentially for free, to anyone willing to build in America. Taxes will refund the money.

And increase CAFE with penalty’s for not complying with it.

Also at the same time they would need to secure the parts chain. This would be cheaper than letting it all fail.

(Quote)
carcus Says:
November 17th, 2008 at 12:03 am

Buying a $600,000 home on a $60,000 household income — fantasy.

Using a home equity loan to pay off $30,000 worth of credit card bills for crap that you didn’t really need — fantasy.

Shopping for a $35,000 SUV that gets 14 mpg and the only real monetary consideration is “what’s the monthly payment?” — fantasy.

Then both sides of these ridiculous deals get slapped with — reality.

I don’t think a bridge loan (with or without the volt) is gonna solve this problem.

(Quote)
Jeff M Says:
November 17th, 2008 at 12:31 am

It’s not Dems vs. Republicans… it’s the fiscal conservatives vs. those living on fantasy island believing that another $25B in loans is going to solve the problems of the big 3. The auto makers will be back and back again for more and more infusion, with the same mantra “we are too big to let go chapter 11″. Look how many times AIG so far has come back to the “well”… the “well” of the taxpayers, both current and for many future (possibly generations to pay off the ever increasing debt).

Chapter 11 is NOT chapter 7, chapter 11 is the only way the big 3 have any chance of ousting the management and boards that got them into this situation in the first place, as well as allow them to go back to reopen contract talks with the unions. Don’t listen to Levin, nice guy, but just like Ted Stevens (Alaska), he represents his home State well, not the American taxpayers in general.

Remember we were told by our “leaders” that we could not wait for the UN when it came to Iraq, we had to go in ASAP. Remember how were were told we had to act ASAP for the first bailout, in fact that it had to be done that week when Bush/Paulson told us… yet even though it took 2 weeks to pass, there was no immediate “failure” (key words you hear now). And now over a month later, Paulson now says they are doing a 180 and need to attack the problem in a different way than they told it “had” to be used.

Also remember how Lyle wrote here on this site last Summer how GM told us they had the money to go two years or more! Now months later they need the money “now” or it’s “failure”. Fool me once, shame on you, fool me twice, shame on me….

(Quote)
Dave K. Says:
November 17th, 2008 at 12:53 am

A radiator hose clamp supplier to GM just laid off 20% of their workforce.

This will be an interesting week.

=D~

(Quote)
DonC Says:
November 17th, 2008 at 1:04 am

#72 Jeff M – “it’s the fiscal conservatives vs. those living on fantasy island ”

The problem is that the so called “fiscal conservatives” are the very same politicians who managed in three years to take the the largest surpluses in history and transform them into the largest deficits in history. How did they manage to do that? Simple. By cutting taxes and going to war. When they were in power they suspended the “pay as you go rules” and spent like drunken sailors on shore leave. Now that they’ve screwed up and been given the boot they’ve suddenly rediscovered religion. Lacking the character to own up to the fact that the budget problems are of their making, they are pathetic excuses for leaders.

You are right that there is a consensus of both right and left leaning economists. That consensus is that we need to forget about deficits for the next year or so. Dick Cheney was completely and impossibly wrong when he said deficits don’t matter. Deficits do matter. But they don’t matter nearly as much as getting our economy back on track.

In this regard, the people really living on Fantasy Island are those who think that if we stick our heads in the sand the free market will save us and everything will be just hunky-dory. Not going to happen.

(Quote)
NeoCon Says:
November 17th, 2008 at 1:21 am

I think the government has to appear to play hardball or every mom-and-pop in the country would have their hand out.

To those against the loans, and bailout in general, it should be noted that the ‘bailout’ is not simply a bunch of cash and taxpayer money for free. It is guaranteed LOANS at no/low interest that they have to pay back eventually.

We need these cars to get us off our dependence of foreign oil. We need GM to survive to keep people working. The government knows this and will act accordingly after some gnashing of teeth and playing the tough guy act. Republicans (I am one) are in bad shape after the last election and want to be able to say they opposed it if it goes wrong – but they’ll vote for it eventually so that they can also smile and shake hands with those on the other side of the isle for the TV cameras celebrating the ‘bipartisan solution’ – but not before making some good sound bites on CNN about being against it.

There are also notable democrats who are against it publicly, but it will get passed.

Don’t panic, its just politics – and right is right in the end.

(Quote)
jbfalaska Says:
November 17th, 2008 at 1:24 am

NeoCon, the auto industry would receive loans. The banks differ; the government is buying stock (lates Paulsen approach – he changed his mind). The money is not a loan in their case. Well spoken toward DonC. Imagine if we had kept the surpluses going before Dick Cheney’s stalward proclamation about deficits don’t matter. He passed judgment on where to take the economy along with Bush. Imagine if this country had foregone that economic mismanagement and subsequent tragedy. Imagine having that $600,000,000,000.00 ANNUAL INTERST PAYMENT to now help with the adversity they promoted. A generation it will be to pay off the reckless Bush/Cheney Deficit. I quit the party over their fiscal irresponsibility.

(Quote)
NeoCon Says:
November 17th, 2008 at 1:37 am

jbfalaska, I looked into the info on the securities purchases. Thanks for the correction. (edited)

Now about the deficit – we are not alone in this. Debt in relation to GDP is not as bad as many countries.

1 Zimbabwe 23640.66
2 Japan 195.5
7 Italy 104
22 Canada 65
23 France 64
25 Germany 63.1
27 United States 60.8
47 Switzerland 45.3
49 United Kingdom 43
102 China 18.4

I think we need to keep a cool head.

(Quote)
jbfalaska Says:
November 17th, 2008 at 1:38 am

NeoCon, fully agree with your premise – the country absolutely needs the auto industry, robust, retooling, and preparing to play the important part of the economy necessary to break our Middle-East oil addiction.

My wife and I both are retired military. To illustrate, (Kuwait being this example), going over there to protect these rich individuals was as if the Polish army came over here to protect America. They Kuwaitis are extraordinarily rich as are most of the Emirates, Sauds, etc.. In Kuwait, every Kuwiati received free college, free healthcare, servants, and an annual stipend of $75,000 per person just for being a citizen (no foreign bloodline to collect). Where did that money come from – our addiction.

(Quote)
NeoCon Says:
November 17th, 2008 at 1:46 am

Thanks for your service jb.

Vote for the loan congress! Your reservations are duly noted.

NPNS

(Quote)
jbfalaska Says:
November 17th, 2008 at 1:57 am

Keep in mind NeoCon, deficit numbers as a percentage, which you post, tell only part of the story. Consider Japan as an example – their effective rate on the debt is 0% on most notes, and a quarter percent on many more. They effectively borrow for nearly free. With that, borrowing is much, much less than the penalty of our debt. I add, they also are an enormous creditor nation to other countries thanks to their large trade surpluses with nearly all other countries except the Middle-East. They are in fact in surplus.

Back to our debt: Bush started TIPS to reignite the Chinese appetite to lend to America our own trade dollar deficit back to us. With TIPS, every percent above 0% holds an enormous magnifying effect by every point the rate rises. Let’s pray inflation doesn’t do the 10% like it is nearly everywhere else or America is essentially going to have to pay 50% tax rates or file bankruptcy, unable to repay without more borrowing at yet higher rates.

My point is not all debt is the same and some of those countries are exceptionally healthy regardless of that post, and some are heading off into severe situations when combining creditor and trade deficit status. We unfortunately fit the latter category. Few countries (excepting those with an effective borrowing rate of near zero) would suggest a debtor status is preferable to a creditor status. Eishenhower, Kennedy, Nixon, Carter helped us attain legendary creditor status. Reagan, someone any military member as I am would admire, unfortunately began the new trajectory: The dreaded double deficits of trade and budget.

(Quote)
NeoCon Says:
November 17th, 2008 at 2:51 am

But even if you compare only the US numbers, before and during WWII, our debt as a percentage of GDP was much higher than even now.

I see three spikes in the debt/GDP: New Deal, WWII, Reagen/Cold War, Iraq.

My point is only that there is a historic president to investing public dollars in strengthening the economy. Its worked in the past. The only time the Debt/GDP numbers went down significantly was the post WWII prosperity and during the dot-com rush, which we all know was really the dot-com bubble, that unfortunately burst on W.

But still we have room in our economy to invest in the future.

As much as an Obama presidency makes me anxious to think of, hopefully we have a second-new-deal (bailout), post Iraq war period of prosperity where we build our base manufacturing and get ourself weaned off of foreign oil.

http://en.wikipedia.org/wiki/United_States_public_debt
http://en.wikipedia.org/wiki/New_Deal

‘Free’ borrowing (e.g. Japan) is not always a good thing. Our Fed controls the heating of the economy by adjusting interest rates to counter inflation.

Inflation in Japan is lower than ours, hence the ability to keep rates very low.

http://en.wikipedia.org/wiki/Image:World_Inflation_rate_2007.PNG

Oh, and I’m also a huge Reagen fan, of course.

(Quote)
Casey Says:
November 17th, 2008 at 3:10 am

no more bailouts GM can’t sell cars now why will they sell them later. Stop all bailouts get government out of business, let the private sector get back to what they do without the government interfering, stop the maddness

(Quote)
Dave K. Says:
November 17th, 2008 at 3:48 am

S&P futures were – 46.2 at the close on Friday. They are + 7.5 as of 0300 Monday.

Asia markets are flat or slightly down. How can the S&P futures have changed + 53 with no interest from Asia?

T.A.R.P.?

And General Motors is UP 10% (at the moment) in Asia.

T.A.R.P.?

This will be an interesting week.

=D~

(Quote)
Dave K. Says:
November 17th, 2008 at 5:55 am

11/17/08 0543 hours

TOKYO — Highlighting its urgent need for operating cash, General Motors Corp. said Monday it sold its remaining 3% stake in Japan’s Suzuki Motor Corp. on the open Tokyo stock market for about $230 million.

GM said the move was “based on a mutual agreement,” while the Japanese compact-car maker said it was mindful of GM’s need to secure funds as it reels from a slump in auto sales in its major markets and high operating costs.

The U.S. auto giant said it sold the shares for a price that matches Suzuki’s closing share price in Tokyo Monday of ¥1,363.

___________________________________

General Motors is UP 12% (at the moment) in Asia.

=D~

(Quote)
RB Says:
November 17th, 2008 at 7:20 am

#68 DonC says
#42 RB – “The $700B bailout bill was intended to stabilize financial companies, not industrial companies.”
This is a moronic argument. Assuming GMAC is not a financial institution, which it obviously is, the bigger issue is that this hardly argues against CHANGING the bailout to include manufacturing.
===========================================

Well Don some of us here like me are just morons.
Fortunately we have your brilliance to light the way to the truth

Do you have to go into a closet each morning so that the sun can come up?

(Quote)
statik Says:
November 17th, 2008 at 8:46 am

#77 Neocon/#81 Neocon

jbfalaska, I looked into the info on the securities purchases. Thanks for the correction. (edited)

Now about the deficit – we are not alone in this. Debt in relation to GDP is not as bad as many countries.

1 Zimbabwe 23640.66
2 Japan 195.5
7 Italy 104
22 Canada 65
23 France 64
25 Germany 63.1
27 United States 60.8
47 Switzerland 45.3
49 United Kingdom 43
102 China 18.4
———
That looks like data pulled from the CIA World Factbook, which is rarily updated…and drives us crazy in Canada.

For instance, Canada is not at 65% anymore, it is currently at about 28%, the lowest of the G7 thanks to over a decade of federal surpluses (and has been the leader since 2004). You can see how the trendline for us has been pretty sweet the last decade.

Chart of federal debt expressed as GDP
http://www.budget.gc.ca/2008/images/ann1-5-eng.gif

Chart of expected budget surplus/deficits of G7 (a little dated..it has the US at a expected -3.2% when it came in at 7.4%, but you get the idea)
http://www.budget.gc.ca/2008/images/ann1-7-eng.gif

That of course is over now for us with this recession/depression pushing the price of crude to under $60. We look to probably run a small deficit in 2009 of around 3-5 billion (which is still just pocket change…going into 2010 we may face a much larger number)

The US came in at around 65% at the end of 2007, but with the 2008 numbers just in…and with this latest 237 billion dollar whack in October, that puts it around 73%.

The problem even still is not the US GDP (which is not good…but not hideous), the problem is the trend…as in, spiralling out of control death drop, with no hope of even maintaining the current burn rate.

2007 Deficit 460 Billion = +3.4% to ratio
2008 Deficit 1.01 Trillion = +7.4% to ratio

Estimated 2009 Deficit? Est. 1.5-2 Trillion, or +15% (88%) It is already at 237 billion through the very first month October.

America will be top 10 in less than 18 months at current burn rate (10th in 07 was Greece at 89%), and climbing the charts…and that is a big problem. At the current rate the US will be past their peak WWII ratio (about 115-120% if I remember correctly) you spoke up in less than 3 years.

(Quote)
statik Says:
November 17th, 2008 at 8:59 am

Neocon, update through October:

US GDP: 14.4 Trillion
US National Debt 10.5 Trillion

GDP as a ratio: 73%

Sources:
Debt
http://www.treasurydirect.gov/NP/BPDLogin?application=np

US GDP (2007 numbers, but we have two quarters now of negative growth…so it has to be really close to being accurate)
http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=5&FirstYear=2007&LastYear=2008&Freq=Qtr

(Quote)
Keith Says:
November 17th, 2008 at 9:37 am

Do you honestly believe that GM was actually going to assemble a car called the Volt. They haven’t even built the assembly plant yet , they havnt even decided who if anybody will make the batteries, they havent built the plant that will make the gen-sets yet either. The word is that they will use the Cruze engine , but the Cruze is on hold until 2011.
It is all smoke and mirrors because dont think that everybody is stupid in Detroit. GM knew that this financial crisis was coming and had to come up with something to take to the government so that they could get a bail out Come on these are big boys , not children.. They play big boys games. GM controls more money than some countries for Pete’s sake.
Stupid like a fox in the hen house. I say . The Volt is nothing more than smoke and mirrors right now , and if GM is forced to then they will have to make them but if they aren’t forced to it will die as a dream . A nice dream , but a dream non the less .WHO KILLED THE GM VOLT HYBRID CAR might be a good movie title for Chris Paine.
If you believe that GM shows any corporate responsibility , then you must also believe that the moon is made from blue cheese too.

(Quote)
Jeff M Says:
November 17th, 2008 at 12:19 pm

#72 Jeff M – “it’s the fiscal conservatives vs. those living on fantasy island ”

#75 DonC – “The problem is that the so called “fiscal conservatives” are the very same politicians who managed in three years to take the the largest surpluses in history and transform them into the largest deficits in history”
********************************
You misunderstood… I said “fiscal conservatives”, not Republicans. I fully agree that the Republicans over the last 8 years have proved they as a party are not the party of fiscal conservatism (instead they’ve become the party of religious conservatism, something that started with Reagan).

There are however there are still some fiscal conservatives left in the Republican party (Ron Paul whom I supported during the primaries, and John McCain *before* he ran for his parties nomination), but there are also fiscal conservatives in the Democratic party as well, like some of the “blue dogs”. Unfunded (by an equal amount of spending cuts) tax cuts by Bush is NOT fiscal conservatism. And I won’t even go in how the Republicans are NOT “social conservatives” either as that’s not relevant to this discussion.

Back to the discussion… it’s still “fantasy island” for anyone to think that an additional $25B to the big 3 is going to solve any problems… it’s only going to be pissed away and delay the inevitable. They will be back to the “well” for more in a matter of months. They need to go into chapter 11 (not chapter 7 and liquidate) so they can reorganize, which means getting rid of the managements that got them into this situation in the first place. Maybe within chapter 11 we (the taxpayers through the Feds) we can provide them targeted loans.

Another choice that I heard which was an interesting idea…. why doesn’t Exxon/Mobil, with their record profits, loan the money to the big 3? After all, it’s in big oil’s best interests to keep big auto in business, they’ve always had that symbiotic relationship.

(Quote)
RAH Says:
November 17th, 2008 at 12:31 pm

I may be missing something here but didn’t BIG oil help to eliminate the EV-I and prop up the big three against the zero emission requirements in California to benefit its self/ Where are they now and wouldn’t they again benefit from using some of those record profits earned lately to prop up the big three now. Why does this bailout money have to come from the taxpayer?

(Quote)
Kent Says:
November 17th, 2008 at 12:55 pm

Of course Chapter 11 is fantasy. But bankruptcy is not! The other option is Chapter 7… liquidation. No one would buy a car from a bankrupt car maker. Who would risk their warranty becoming worthless and having no dealer to service their car??
GM is desperate. They have tried to sell their HQ in Detroit and lease it back, and now they are even selling their stake in Suzuki. For $230 million. That’s desperation. It’ll probably only last them one day!
If you want your Volt, you better write to your government. Here’s a link that GM set up:
gmfactsandfiction.com

(Quote)
kdawg Says:
November 17th, 2008 at 1:59 pm

#88 Keith Says:
November 17th, 2008 at 9:37 am
Do you honestly believe that GM was actually going to assemble a car called the Volt. They haven’t even built the assembly plant yet , they havnt even decided who if anybody will make the batteries, they havent built the plant that will make the gen-sets yet either.

——————————

Yep. The plant is Hamtramck, batteries by LG, engines at Defiance..etc. They have every intention to build it, barring bankruptcy.

(Quote)
DaveP Says:
November 17th, 2008 at 2:09 pm

I was getting pretty gloomy about the whole thing last week. But I’ve had a very small bowl of ice cream (now not only 1.5 quarts instead of 1.75, but $4.99 instead of $2.99! and relaxed a bit.

I’m basically in agreement with DonC, that if you are trying to use the bailout money to prevent financial collapse, you have to ask youself WHY do you want to prevent financial collapse? Ultimately, it’s to keep people working and buying, and so it’s not a very far stretch to consider helping the auto manufacturers to keep people working and buying. It’s a smaller pool of people, but it’s correspondingly cheaper.

It’s also proven historically nearly impossible to start an automotive company and we need some companies “in our pocket” to get the country off of oil which it also so desperately needs to do.

And a further argument can be made that the two things most people use “bank” credit to buy (as opposed to credit cards) are houses and cars. So, both markets have been severely disrupted by the lending meltdown. On that basis alone I think we could justify loans for the automakers.

However, I think if the automakers were in good shape before hand, we wouldn’t be grousing about bailing them out due to unprecendented financial conditions. The underlying problem is they’re (as one senator put it, aptly) a bunch of dinosaurs and the businesses are in terrible shape.

So, what to do? I suspect the thing to do may be to back up a step and use the government for what is has the most experience in doing. REGULATION. I’ll float an idea and you can kick it around a bit.

Have congress pass a law that makes a special bankruptcy for the automakers possible. One that simply prevents chapter 7 (maybe by requiring a congressional signoff or something). They may also have to guarantee some small bridge loans for the chapter 11 bankruptcy proceedings (since the banks are still not all THAT interested in loaning money).

What might this do?
Make it easier for the automakers to do the restructuring they so desperately need to do (or have done) by preventing the dreaded chapter 7 scenario.
That could give people confidence to continue buying cars from the company, basically assured they would be there in some form in the future.
We can also write in our vested interests for promoting “oil free” cars as well.

No matter how this works out, there’s going to be some huge losses on GM for somebody and lots of jobs will be lost. And that’s regardless of whether they go bankrupt or not. Clearly the stocks have lost and the jobs must be trimmed if nobody is buying cars from them.

I think what we really must to is prevent the loss of the entity, the capability if you will. Nobody will come by to replace it when the car markets pick up and the oil prices go up again. We (as a country) need to guarantee that we’re ready for that and at least GM with the Volt is making overatures in that direction. With a little regulation supporting that, we can help drag the car companies in a direction that will ultimately help the US, but they will have to survive somehow to do that.

(Quote)
noel park Says:
November 17th, 2008 at 2:52 pm

Enough already with Rick Wagoner and the big chicken game. You mean to tell me that, if the Senate doesn’t come up with the cash, he’s just going to lock the doors and go home? Right.

Even I can run out of patience with this.

(Quote)
Tall Pete Says:
November 17th, 2008 at 3:42 pm

#86 – Statik

Always a pleasure to read your thoughts. You’re right on the money as almost always. If not for the conservative party’s GST cut of 2% (yeap, they cut the tax rate and I was against it, truly canadian behavior), we would have a nice cushion to face the turmoil.

(Quote)
Adrian Says:
November 17th, 2008 at 3:49 pm

#89 Jeff M… you got it right. The Republican congress that Don talked about was so middle of the road, that they could of actually been from the other party.

I would say as some have said, the bailout of any US car company is wrong. My tax dollars should only be used for government uses. Funding a private company is not one of them. post #81 is incorrect in using such examples to support a bailout of a US private company. The New Deal actually hurt the ability (if not made it worse) of the economy to bounce back. I would not use military spending of WWII (or Reagan’s military spending increases) either, as WWII or ending a Cold War is a very special circumstance.

Ch11 is there for this very reason. If Toyota was going under and 10s of thousands of USA sales/manufacturing/engineering jobs were at stake, would we care so much? GM should fill Ch11 (as should all the big 3) and work with UAW to come up with some grand plan for the future.

(Quote)
Adrian Says:
November 17th, 2008 at 3:52 pm

http://www.americanthinker.com/blog/2008/11/why_we_should_allow_gm_to_go_b.html

Here is a straight forward reason (one of many) why GM needs Ch11.

(Quote)
Jeff M Says:
November 17th, 2008 at 4:07 pm

#91 (Kent) wrote “If you want your Volt, you better write to your government”

There’s the problem Lyle has… I feel he (and some others here) have been blind sighted that GM needs to be “bailed out” or we won’t see the Volt be built.

We all want to see the Volt built! However I’m happy to say lots of us here appear to be level headed to not be willing to spend an open ended amount of our tax dollars to keep a company alive in it’s current state just so they can build the Volt.

Folks, even if the Volt is not built, others will be there to fill the void. With the type of money being proposed here to keep GM out of chapter 11 in the short term (not to mention the additional money they will be asking for possibly every few months) we could buy everyone here a Tesla Roadster! (with the government investment in Tesla and the quantity to be built, ie. economy of scale, we should be able to build them for a small fraction of the current $100k each).

If your elected law makers decide to piss your tax payer money at the big 3, what’s next? Let’s bail out Circuit City, Linens & Things, DHL, and the list goes on.

(Quote)
Jeff M Says:
November 17th, 2008 at 4:14 pm

ps: for those worried that if the big 3 do go chapter 7 (liquidation) and not just chapter 11 (bankruptcy protection/reorganization) will result in us sending more money to Japan and China… some things to keep in mind…

1. all that “bail out” money is not coming out of a surplus of paid for by spending cuts or tax increases… it’s all more money being borrowed from China, etc

2. most of the other auto makers outside the big 3 build cars right here in the USA, employing American workers. They are also buying parts from the parts makers, have dealerships, etc just like the big 3. The slack will be picked up and all auto related jobs will NOT be lost.

3. speaking of jobs… regardless of whether the big 3 stay our of chapter 11 or not, tons of jobs losses will still occur throughout the auto industry. That’s a fact, “bail out” or not.

(Quote)
statik Says:
November 17th, 2008 at 4:19 pm

#95 Tall Pete

Statik, Always a pleasure to read your thoughts. You’re right on the money as almost always. If not for the conservative party’s GST cut of 2% (yeap, they cut the tax rate and I was against it, truly canadian behavior), we would have a nice cushion to face the turmoil.
———————–
Yeah, I still have mixed feelings on the GST cuts. At my heart I always want less tax…but I also like ‘no debt,’ as that also gives us less tax from not servicing the debt. They could have been lopping off a lot more of the national debt…if it was all directed as such.

Still, at this point simple inflation will all but obliterate the national debt in less than 15 years, provided we can hold close to even…it is a tough call.

(Quote)
Joe OBrien Says:
November 17th, 2008 at 4:41 pm

Wait a minute, I’m not a mathmetician or anything, but barack takes office on January 20th, basically a little shy of two months away. Gm needs at least around 12 to 14 billion a year to operate (throw money away as I interpret it) and they have 16 billion left.

Sounds to me like 12-13 months left till they are dead without a bailout.

Why can’t they make it another two months???

Also, am the only one who feels giving part of the money to Chrysler is fair? They ONLY build gas guzzling trucks. That stupidity is clearly their own fault.

My $0.02

(Quote)
statik Says:
November 17th, 2008 at 4:53 pm

#101 Joe OBrien

Wait a minute, I’m not a mathmetician or anything, but barack takes office on January 20th, basically a little shy of two months away. Gm needs at least around 12 to 14 billion a year to operate (throw money away as I interpret it) and they have 16 billion left.

Sounds to me like 12-13 months left till they are dead without a bailout.

Why can’t they make it another two months???

———————

Two things:

A) They currently burn 2 billion a month

B) They reported 15.9 billion left on SEPTEMBER 30th, 2008, they merely released the quarterly results November 7th.

Best guess is they are at about 12.5 billion right now…they got about 3 weeks max left.

(Quote)
statik Says:
November 17th, 2008 at 5:01 pm

Further to GM having NOTHING left and on the verge of packing it in.

We already had them selling off the remainder of Suzuki today for $230 million.

Now we have them screwing the dealers (who aren’t ordering anything anyway). They are actually breaking comittments to them now. They are pushing out all the incentive payments (about 300 million) back two weeks.
—————————————————-
Letter from Mark R. LaNeve to all the dealers
http://www.autonews.com/article/20081117/ANA02/811170253/1142/emailblast02&refsect=emailblast02

To All Dealers:

I am writing to you to update you on changes we are going to implement with regard to the incentive payment schedule.

As I discussed in the IDL last week, one of the biggest issues facing General Motors is our liquidity. That is the cash we have on hand to pay for our regular operating expenses.

In this cash crunch, we have examined every aspect of our business in an effort to improve cash flow, including our relationships with all of our key stakeholders, like suppliers, agencies, employees and dealers. In this regard, we are implementing minor changes to incentive payment timing. So, what does this mean for you? Basically we are delaying the payment of the incentives by two weeks. Here is the new schedule that will be in effect until further notice:

· Incentive applications previously scheduled to be paid on November 28th and December 4th will be delayed to December 11th and December 18th respectively. Please see the attached payment schedule.

· Weekly incentive payments will continue thereafter reflecting one week of dealer application activity. On average, payments will be made approximately 2 – 3 weeks after a valid dealer application has been processed by GM. Effectively this is a 2 week delay from the current schedule.

· As a result of this retiming you will not receive any incentive payments on November 28th and December 4th.

This liquidity crisis has an obvious effect on all of us. As you are aware we are asking the federal government for some temporary relief. I need your continued help in talking to Congress. There are three things you need to ask your congressional delegation for:

· First, ask the government officials to approve a new $25 billion loan package to help us deal with our current liquidity crisis.

· Second, while the rules for the distinctly separate and already approved $25 billion loan package for investments in technology and enhanced fuel efficiency have been issued, we’d like to see that program move as fast as possible, so we need to encourage the government to minimize red tape and act on loan applications as quickly as they can.

· Third, the automotive industry needs some additional government support to stimulate retail sales, like making interest on car loans tax deductible, etc.

We’ve set up a website that will assist you in making your voice heard in Congress and to help spread the message. Please visit http://www.gmfactsandfiction.com. If you have not already done so, please call and e-mail your congressional representative.

This is a critical time for our industry, your dealership, and General Motors. Please continue to do what you do best, selling vehicles one customer at a time. Please make every effort to integrate your promotions with the recently announced Red Tag sales event.

Together we can work through this crisis. As always, thank you for all of your hard work and effort.

Good Selling.

Mark R. LaNeve

——————————————
My interpretation of this was I thought GM had about 27 days cash after they released there Q3 back on November 7th (which would have given them until December 4th), now I’m thinking with this news that the number is under two weeks…the dealers probably don’t ever see this money without intervention.

It is looking pretty clear that we have a D-day of around November 30th now.

/good selling indeed Mark

(Quote)
DaveP Says:
November 17th, 2008 at 7:11 pm

It would seem that the simultaneous ideas that GM needs to go bankrupt and needs to survive are gaining traction. More than one person is thinking along the lines of a “chapter something else” government “facilitated” bankruptcy for GM:
http://www.portfolio.com/views/blogs/market-movers/2008/11/16/gm-the-bailout-vs-bankruptcy-meme

Unfortunately for GM it doesn’t look like they’re going to last long enough to do something optimal. It looks like they’re about to spin the barrel and pull the trigger and we’ll all see what happens.

I know I’ll be keeping my fingers crossed for a \Volt to plop out of all this in a couple years…

(Quote)
noel park Says:
November 17th, 2008 at 7:29 pm

The Aptera is looking better every day.

(Quote)
statik Says:
November 17th, 2008 at 8:41 pm

#105 noel park

The Aptera is looking better every day.
——————————
If only they made it with 4 wheels and the seats to match…sigh.

(Quote)
RB Says:
November 17th, 2008 at 9:08 pm

#103 statik says
My interpretation of this was I thought GM had about 27 days cash after they released there Q3 back on November 7th (which would have given them until December 4th), now I’m thinking with this news that the number is under two weeks…the dealers probably don’t ever see this money without intervention.
==============================================

Perhaps you are too pessimistic. By Nov 30 they may have only $12B in cash, but that doesn’t mean they are out of money, just not operating normally. So they put off payments to dealers and everyone else for a couple of weeks, and then pay, and then another delay of a couple more weeks, but they do continue to make payments, even if later and later. I think dealers will see more money, along with more delays. The jig is not up until around April 1, a fitting date.

The place I go wrong is if what you mentioned about dealers no longer ordering cars is true, In that case, the dealers will choke GM first.

Of course, before then there will have been government intervention

(Quote)
statik Says:
November 17th, 2008 at 9:32 pm

I was waiting for another ‘finance thread’ to post this but I a very well-connected source (and I hate it when someone says something like that and then doesn’t give his name…but I have to do it in this instance), from my finance site has said that the Dems and Republicans have already agreed on a modified redirection of the 25 billion dollar ‘fuel efficiency plan’ …and that once it is tabled it will get rubber stamped.

This alteration supposedely has very little strings, and is very simplistic in nature…with no oversight attached…just some token ‘executive compensation’ restrictions, which came at the behest of the Dems…it is strictly money to bridge to Jan 20th.

Apparently, Reid stills want to attempt to push through a big fancy 25 billion dollar auto aid package (in addition to the other 25B) inside the extension of jobless aid bill, but Pelosi has altered course somewhat and really just wants to get it done and get what the Republicans are offering, and immediately start working on greasing the wheels to get the money out ASAP (Long story short about the extra 25 billion, they are working the phones right now trying to get to 60 on the extra 25, but it is not going well).

‘He’ says look for the original 25 billion restructure to come out thursday, but friday at the latest.

…long story short, it looks like GM will survive through Jan 20th. Who knows what will happen then, a lot of people in both camps are getting weary of giving out money and are thinking about trimming down handouts big time. It is not 50-75 billion or nearly enough, but it solves some short term issues (if your pro-non bankruptcy)

/but hey, looks like a early Christmas present for those employess still at GM…a few more guaranteed paychecks

(Quote)
Bill Cosworth Says:
November 18th, 2008 at 12:40 am

I am going to make this simple because to many people write too much….

GM does not make the cars people want???

GM sells almost twice as many cars in the US as Toyota.

Bailout ::you be an absolute fool not to. The USG spent 90 Billion on the Aubrey V22 that was a horrible investment.

GM= good for USA puts people to work.

Also people face the facts the HOME business is OVER hello!!!! Your home is no longer going up.

Time to get back to work making goods. Cars are the most expensive good right now.

Why let your money go overseas.

(Quote)
jbfalaska Says:
November 18th, 2008 at 2:11 am

Let’s hope we save our American industry rather than have the taxpayer bailout CEO payouts as was done with the bank bailout. Appalling that 100 men in expensive suits could take in CEO payouts, parachutes, and bonuses equal to more than the entire auto industry bailout combined now up for discussion. How’s that for patriotism to our nation. There are patriotic stripes and to me, these “Captains of Capitalism and Industry” should be wearing stripes of another sort. No wonder the communists are beating us these days with these types at the helm of our industries. Me first doesn’t work.

Apalling to sit here as we’re bailing them for near malfeasance while they go out on Champagne and caviar runs as if this is still the best of times. Well, for them, since we failed to condition the bailout at the insistence of one Party (rightfully blamed – GOP, flame me all you want), regarding compensation caps and parachutes, this may just be the best of times for these unpatriotic, me only, low lifes. They’re giving capitalism a black eye by this unrepentant, poke the public right in the eye, behavior.

(Quote)
MAtt farnsowrth Says:
November 18th, 2008 at 2:16 am

GM needs help from our government:

First The loans to GM should reflect heavy UAW cuts.
Second more taxes on foreign cars like Toyota.

No matter where foreign cars are built heavy taxes.

More Regulation of consumer magazines like consumer reports and no donations allowed by foreign car companies.

We are not allowed to sell cars in japan so lets tax them so we can play on a fair field.

Toyota is like a leach it sucks your cash then moves on.

(Quote)
jbfalaska Says:
November 18th, 2008 at 2:20 am

Neocon, interesting you characterized all 4 situations as investing in the economy. And I’d suggest the recent, most expansive runup in debt in the nations’ history is far more than Iraq as big as a squandering of our nation’s resources as that turned out to be. Iraq was exported dollars, not invested here. if I had to pose a thought, I’d consider the debt associated with the New Deal, and WWII go without much careful thought – save the economy and save the Free World at that time. After that, I would have to debate particulars before stating the Cold War under Reagan was all about investing in our economy. I’d actually suggest Iraq too was a bailout of nearly bust Halliburton at the start of the War. Bush’s $5.5 trillion dollar goliath debt, which only $1 trillion, not to minimize that mammoth size, but the Iraq war was only 20% of the Bush debt legacy.

Statik, Neocon, just be thankful none of us are in Spain, although you rightfully point on our trajectory is heading south fast (with a 1.2 trillion deficit on the way). Spain is in the worst of all debt situations with budget and trade both running wild in the wrong direction. I’d take Japan’s monetary situation from a debt perspective any day. Trade and credit surpluses are entirely masked in the charts posted for them, as well as a significant number of other countries.

(Quote)
Greg Finkbiner Says:
November 18th, 2008 at 2:21 am

Oh Geezer jbfalaska number 110 and 112 is a quack job

Toyota needs to send their goons to English school.

HA HA read his English.

Go GM Go volt

I am proud to support GM and our new president.

(Quote)
Andy Says:
November 18th, 2008 at 4:00 am

Having an aircraft engineering background, I have long been a supporter of the Volt concept, and have rooted for the American Car Industry to again take the lead in production of cars of the Volt type and better. HOWEVER – I have come to realize that the excessive costs imposed on the American auto industry by labor unions make it impossible for them to compete with international manufacturers. Furthermore, laws that have been passed constraining the American automotive industry make it impossible for bankruptcy to work as well – courts can nullify contracts but they can not change laws. So, alas, the US subsidy of the big 3 will be money down the drain, as you will see, and only by a perpetual subsidy of the US automotive industry (actually a subsidy of the labor unions) will allow them to compete with international manufacturers. Furthermore, the unions have the idea to increase the cost of foreighn automotive manufacturers in the US by have a non-secret ballot when voting on whether to have a union shop or not. That way the unions will raise the cost of international manufacturers here in the US. There is no chance that Obama’s administration will not provide the subsidy to the US automotive industry, giving the industry a few more weeks or months of life before they need another injection of subsidy.

There you have it – try run the free enterprise system with the heavy meddling hand of the government interfereing and you get a mess.

There is some question as to whether the 50 mpg of the Volt running on gas 9after it exhausts it’s 40 miles on electricity) is realistic. There is some suggestion that GM it not going to be able to make 50 mpg on gas work. I would not be surprised – perhaps the infusion of subsidies will give the Volt a chance to prove it will or won’t. I will not be surprised if it won’t get 50 mpg. Time will tell on this technical question, but the outcome of the big 3 competing with foreighn automotive industry comes down to a simple exercise in economics.

(Quote)
Ryan Says:
November 18th, 2008 at 4:54 am

I believe the GM Volt needs to survive in order to prevent the oil companies from dominating any longer. We need this Electric car as a tool to better the economy in general, so I really hope that GM gets the governments help next week as it would be in the best interest of not only the USA, but the entire planet….

(Quote)
Dave K. Says:
November 18th, 2008 at 5:55 am

Impact on dealers
A GM failure would also affect about 14,000 dealers in the United States, according to the industry newspaper Automotive News. That is almost half of the nation’s 29,000 dealerships that specialize in domestic vehicles.

But even if those 14,000 GM dealers also offer foreign cars, the risk of losing their supply of domestic vehicles could force many of them out of business, said Paul Taylor, an economist with the National Automobile Dealers Association. Already, he noted, the industry is expected to lose about 700 dealers by the end of this year, up to 80% of which will be domestic-brand stores.

And GM is says it is not considering Chapter 11, but rather is continuing to seek government assistance. “Bankruptcy reorganization is not an option for GM because it would create more problems than it would solve,” said spokesman Dan Flores.

(Quote)
John K Says:
November 18th, 2008 at 7:00 am

I don’t see how these auto companies can complain they need money to assist them with keeping these kind of vehicles coming. They already have $25B in Governemnt loans already set aside for them to retool. What more do they need? Let them file Chapter 11 and get back to basics. Another thing that makes it bad is that I improved my trucks gas mileage by adding aftermarket products, that I am sure that the auto makers could do as well. Most don’t, so we still have to suffer through their incompetencies.

(Quote)
RB Says:
November 18th, 2008 at 7:19 am

#111 Matt says “More Regulation of consumer magazines like consumer reports and no donations allowed by foreign car companies.”
=============================================

Should gm-volt and other web sites also be “regulated”?
Only say nice things about the current administration, whoever that might be?

(Quote)
Jeff H Says:
November 18th, 2008 at 5:41 pm

Whoever said that “electrifying the automobile is a 7.5 trillion dollar industry” is posting as a shill for the oil companies. Tell Honda and Toyota that and watch them laugh. The electric car is a reality, it’s just that it’s at the stage where DVD burners were when they first came out, ridiculously expensive.
That will change with time.
Oh, by the way, here’s an update on gasoline, albeit ninety years late:
“Gasoline will NOT cause enormous fires that consume entire cities.”
Someone said that in a newspaper around 1903.
They were shills for the buggy whip industry.

(Quote)
Jeff M Says:
November 18th, 2008 at 5:58 pm

A British Lesson on Auto Bailouts

http://www.nytimes.com/2008/11/18/business/economy/18car.html?_r=1&th&emc=th

(Quote)
Axxel Knutson Says:
November 26th, 2008 at 8:09 am

GM…PULL THE PLUG, Reset, PLUG BACK IN

Without the THREE U.S. automakers combining into one there is no rationality to bailing out GM. GM’s cash burn is triple the street estimate and has lost all control over its sales, its product development and its future. The executives and the unions have the company hostage to government capital infusion. Bankruptcy is a viable answer that can push off creditors and force unions and management to make concessions that are impossible unless a loaded gun is at their head. There is too much capacity, too many models, too many plants, too many employees producing products that are more easily produced by others. The VW bug was the first indication that the Big Three did not have a clue to the needs and long-term preferences of the U.S. consumer. And today we have a glut of SUV’s that will ultimately have to be sold at a first-ever half-price sale. GM has already built them, they have already paid for them and no one wants them. You need cash, blow them out the door ½ price or less and they are out of inventory and cash hits the balance sheet.

But to infuse GM with cash to keep it afloat without bankruptcy is no answer because next in line will be Ford and Chrysler. These three should be forced to combine and re-form to use their talents and capacity to building something we all need and that is energy independence.

There is one industry that has a payback that cannot be overlooked as a place to re-train and invest and that is in renewable energy. Train those people, insist that the manufacturing capacity of GM be converted to energy and produce, once and for all, a source of energy that once in place CAN NEVER GO UP IN PRICE. In World War II Ford built a massive number of B-24’s in their new Willow Run plant in Ypsilanti. That change in production and product proved that it can be done and Ford did a spectacular job producing that airplane to the considerable consternation to the Nazi war machine. Fast forward to 2008 and our enemy is our own waste and inefficiency; energy independence is crucial to our national safety and we can actually budget part of our national defense budget to this end.

I am not against giving money to GM…but I am against giving them money to build products that have no measurable or important upside to our economy long-term. I am against giving money to GM with Ford looking like that doggie in the window. Force them into solar, wind, wave and nuclear. Support them in their endeavor to re-tool and you got my money. Absent that, you will not get me to suggest giving them, their workers or their bloated retirees belly-aching about their co-pay when millions have no health care a single dime.

The side benefits are obvious: our defense structure is enhanced because we no longer have to depend on a cartel of Bedouins in the Middle-East to determine for us how much oil we are going to use and our environment actually can become healthy in L.A. vs. choking to death sitting in traffic on the five. We put a pin in our energy costs once in for all and bankrupt our dear friends in the middle east forcing them to drive Chevy Cobalts and trade in their Bentleys.

Here is what we said about the Chrysler/GM merger talk=
“Two drunks walking down the street
holding each other up…
until they hit the curb,
then they both fall down”

(Quote)

Recent GM-Volt Forum Posts

Hacked e-mails reveal global-warming fraud? November 20, 2009
This is how open minded liberals operate. "And, perhaps most reprehensibly," Delingpole writes, "a long series of communications discussing how best... […]
BigCityCat
Is the Volt Engine Direct Injected? November 20, 2009
I recently read that the Cruze's engine will be DI. http://en.wikipedia.org/wiki/Chevy_Cruze#Chevrolet_Cruze Obviously the Cruze's engine will... […]
omnimoeish
First Reports of the Chevy Volt's Charge-Sustaining (Generator) Mode Operation November 20, 2009
The first two journalists' reports of what it's like to drive the Chevy Volt while in generator mode operation have been published. 1) New York... […]
admin
Florida giving $5000 rebate to convert Prius to plug-in November 20, 2009
- Probably Hymotion - $10,400 standard price - $5000 state rebate - $1000 additional federal incentives - $4,400 final cost. Hurry because their... […]
Texas
New York Times CSM story November 20, 2009
Link to the New York Times story of November 19, 2009 about a test ride of the Volt in charge sustaining... […]
srschrier
New video: Volt drive in Detroit November 19, 2009
November 19, 2009 Detroit Free Press story with video featuring a Volt drive with Andrew Farah in... […]
srschrier
New Video: Volt Corrosion Testing November 18, 2009
From GM VoltAge, the Volt's corrosion... […]
srschrier

GM CEO Calls Chapter 11 Bankruptcy Filing a “Fantasy”

121 Responses to “GM CEO Calls Chapter 11 Bankruptcy Filing a “Fantasy””

Leave a Reply

Recent Posts

Recent GM-Volt Forum Posts