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Its Down to the Wire for GM

November 20th, 2008 | Posted in: Financial, Politics

Last night, the Senate canceled and essentially terminated any chance of getting GM, Ford, and Chrysler loans from the $700 billion Wall Street Bailout or TARP fund.

The last chance it seems for funding, and likely for survival, will be the slim possibility of both the Senate and the House of Representatives voting favorably, and Bush signing a new proposal being crafted by Michigan Senator Carl Levin. This could come as early as today.

This bill would authorize the immediate release of the $25 billion in retooling loans already approved for the Detroit automaker to be utilized instead for operations.

It is clear at this point that congressional Republicans as well as the Bush administration would be willing to sign that bill. Some senior Democrats however remained opposed, because they feel that money should only be utilized for the process of building more fuel efficient cars.

Levin said however “Are we going to permit a difference over the source of funds for these loans to destroy an opportunity to help an industry so essential to this economy?” A Democratic sweetener of extended jobless benefits could be added to the bill to help it pass.

GM continues to press on without any plans for bankruptcy despite the fact that they are likely teetering on insolvency and could fail at any moment. CEO Rick Wagoner said GM had looked at bankruptcy but felt it would be impossible because as soon as it happened, no-one would buy their products and thus they would have to “liquidate the company because you wouldn’t have any revenue.”

Source (Detroit Free Press) and (WSJ)

Posted by: Lyle

114 Responses to “Its Down to the Wire for GM”

Rashiid Amul Says:
November 20th, 2008 at 7:19 am

Good morning, Lyle.

So for the time being, nothing has changed.
We are in a “wait and see” mode.

These CEO’s aren’t really helping their cause much though.

Also, I am surprised by the democrats. I thought they slept with the union workers. If GM closes, those union workers are out of a job. Who will the dems sleep with then? Oh wait, maybe they can sleep with the republicans and get something done for a change. (Congress can get something done, that is.)

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RB Says:
November 20th, 2008 at 7:20 am

It’s a fascinating drama. What next?
Did Mr Wagoner drop the ball at a critical moment?

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joe obrien Says:
November 20th, 2008 at 7:21 am

Now if GM is asking for what is it, 12 Billion of the 25 Billion package? Isn’t that only a mere few more months of money to basically burn up?

Realistically thinking if they burnt through 16 million in just over half a year, is this simply a 4 month extension of their inevitable bankruptcy? Do they expect to flip the auto market upside down in 4 months?

Or is this just a waste of time & money from a company too proud to admit defeat and restructure under chapter 11?

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RB Says:
November 20th, 2008 at 7:23 am

“GM continues to press on without any plans for bankruptcy despite the fact that they are likely teetering on insolvency and could fail at any moment”
——————————————-

Maybe so, maybe not. Let’s see what they do next.

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Steve Townsend Says:
November 20th, 2008 at 7:26 am

Ohhh, I’m 5th!!! That’s all. Thanks for listening…

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Exp_EngTech Says:
November 20th, 2008 at 7:28 am

Incompetent and narcissistic upper GM management coupled with decades of UAW greed and abuse have set the table for what is now going to occur.

Charlton Heston said it best in a movie….
http://www.dailywav.com/0901/damnyou.wav

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Steve Townsend Says:
November 20th, 2008 at 7:33 am

I really hate to say it, but I am starting to think that C7 is the best. Thought I would be the last to think so, but it may be time to level the playing field by eliminating the unions, etc.

I give my best to the US auto industry. Good luck..

Steve

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Detroit Losers Says:
November 20th, 2008 at 7:37 am

GM got what they deserves. I hope Ford will come out of this as a healthy automaker, as for Chrysler, they should shutdown for good because of their inferior quality!

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D'Artagnon Says:
November 20th, 2008 at 7:40 am

Talk to me about poverty when GM sells its corporate jet.

Bless his heart, Rick Wagoner has got to be the poster child for an Out-of-Touch CEO.

Best regards,

D’Artagnon

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Alex S Says:
November 20th, 2008 at 7:45 am

The republicans think sending 700 billion to “FREE IRAQ” is a good deal, but don’t think rescuein automakers with 25 billion is important. The US automakers revenue almost 500 billion a year !!!!

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Ed Buratti Says:
November 20th, 2008 at 7:46 am

Think Wagoner will get another 8-figure bonus this year? These guys are too-far removed from their product. They have no idea how to save these companies. They only know how to take and take and take and keep blaming everyone else. I just found a listing of most and least reliable cars in Consumer Reports. On one page it shows exactly what’s wrong with the big three. Look down the most reliable column – there’s one big 3 car, the Pontiac Vibe, which is a Toyota. Look down the least reliable column – mostly big 3. Meanwhile, we keep hearing about labor costs, or anything else except these companies are not buiilding good cars. What they really need is to get rid of all the management from about 3 levels above worker to the top, and replace them with some people who know something about cars, and care about building a high-quality affordable car. Until that happens, the big 3 are doomed. Anyone who takes a private company jet to ask for money because their company is running out just doesn’t get it.

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Earl Says:
November 20th, 2008 at 7:47 am

Why would all of you visit a site based on the Volt, only to wish the destruction of the company who is going to bring you that car? Does anyone in here understand that if GM goes, so goes the Volt?

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Jim I Says:
November 20th, 2008 at 7:56 am

Earl #12:

As much as I would like to purchase a Volt, these guys destroyed their one chance to show the American public they deserve some help. The vauge promises were not enough to convince anyone to lend them some money.

They had no detailed plans on how they were going to streamline the companies. No specifics in place to cut all management pay, perks, and bonuses. No agreement with the UAW to cut wages, benefits, and job overlap. Nothing to show that they were willing to fight to make their companies viable operations.

I can not believe how unprepared they were for these sessions.

Especially after our legislators handed over hundreds of billions to Wall Street, and now are in the hot seat for not making sure it would be used specifically for the intended purposes. If they want to be re-elected, and that is all they are concerned about, they can’t make the same mistake twice in just a few months…..

The CEO’s of the auto industry needed some pointers on how to go and ask for help with hat in hand!!!

JMHO

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brad Says:
November 20th, 2008 at 7:57 am

Its a sad sitution but I guess its what you could say “Revenge of the Electric Car”

If only GM had an electric car like the EV1 currently in production then Congress would have been much kinder to them.

No Plug = No Sale
so without a plug how do you survive for 2 years on cars people don’t want.

Here is hoping GM’s hail mary pass makes it before time is out!
Go Volt!

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THOM Says:
November 20th, 2008 at 8:01 am

#12
Notice wagoneer didnt state the “volt” as a reason for the loan.
He was smart enough to realize if he got a govt welfare for this so called project and WHEN this fallicy (the volt) doesnt materialize he is in deep dodo!

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Jim I Says:
November 20th, 2008 at 8:08 am

brad #14 has it right.

We are all here saying No Plug, No Sale.

So what do the automkaers expect to do for income over the next few years while people wait for the new technologies? Unless my car dies on me, I am waiting.

I truly believe they think that as an act of patriotism, we are supposed to go buy a new SUV right now, just to help them!!! Sorry guys, if you want my money, prove to me that you deserve my business, and show me a product that is worth buying…..

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RB Says:
November 20th, 2008 at 8:13 am

On a more positive note, the WSJ web page (wsj.com) has a nice Volt ad on the right column of the front page. Very nice looking car. Let’s all go buy one

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Koz Says:
November 20th, 2008 at 8:16 am

“NEWS ALERT
from The Wall Street Journal

Nov. 20, 2008

GMAC Financial Services said it submitted an application to the Federal Reserve for approval to become a bank-holding company. GMAC also said it is asking to participate in the Treasury’s Troubled Asset Relief Program.”

The only thing shocking about this is: what took them so long?

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statik Says:
November 20th, 2008 at 8:19 am

Wow, the grandstanding Dem package didn’t work? wow
It died almost the second the testimonies stopped? strange
They are scuttling it & now are changing the terms of the ‘retooling’ loan? so innovative
The ‘new plan’ releases funds immediately too? quelle surprise

/shocker all around

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dc Says:
November 20th, 2008 at 8:19 am

I just dont see the point in giving them 25 billion. Whats that a few months burn rate for the Big 3? Big deal. So they’re back in the handout line again in February?

Either give them $500 Billion or nothing. The auto market isnt going to flip in hte next 90 days.

After watching the arrogance of these guys I have no sympathy for them. They had no specifics for anything. Wagoner had no idea how much cash on hand GM had? Either he really didnt know – which is absolutely inexcusable – or he was lying before Congress.

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nasaman Says:
November 20th, 2008 at 8:19 am

The best general idea I’ve heard is based on applying the lessons of history…. 1) the Great Depression in the 1930’s and 2) the “War to end all Wars” (WWII) immediately following the depression. FDR launched huge work projects in the ’30’s to provide employment to millions and to improve the nation’s infrastructures. Soon after, He essentially forced the big 3 to stop making cars & to retool to make tanks, airplanes & even guns. This massive undertaking by the automotive industry proved they could respond fast and effectively to crisis situations ….and the government contracts for the machinery of war kept both the automotive industry and the nation’s economy viable during (and following) the war years.

My proposal is for Congress to pass legislation necessary to fund the GSA (General Services Admin), who have long procured cars and trucks for most of the rest of the Federal Government (except for the Armed Services, of course), to place massive orders under procurement contracts for as many as 200,000 fuel efficient, hybrid and E-REV cars to replace their existing fleet of over 200,000 vehicles with more modern, much “greener” & much more fuel efficient vehicles.

This would give GM, Ford & Chrysler firm, multi-billion dollar government contracts (which they should be able to borrow against). It would also get the “ball rolling” for highly fuel efficient new vehicles and let the average American know that highly-efficient cars would be a positive legacy of the current economic crisis (like the little Jeep was a legacy from WWII that still lives on). It would keep auto workers employed & factories busy, allowing both the industry & its workers to get back on their feet financially. And it would lead the way into hybrid & E-REV car/truck designs that would eventually wean the US off of foreign oil.

It worked in the 30’s & 40’s ….in fact, the US rose from a desperate, financially-anemic economy in the 30’s to the world’s strongest economy after WWII!!! ….due primarily, I believe, to the multi-billion dollar government contracts placed with the big 3 for the machinery of war! We know it works. So let’s do it again!!!

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Msk1ster Says:
November 20th, 2008 at 8:20 am

Looks like the Volt is doomed. I’m going to buy a Phoenix Motors electric truck. It has a 130 mile range and can be recharged in 10 min. Good by gas companies and hello renewable engeries.
I’m done with the big 3 and I’m done with the oil companies.

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Rashiid Amul Says:
November 20th, 2008 at 8:21 am

Koz # 18 says,

The only thing shocking about this is: what took them so long?
——-
I was thinking that myself.
I have to wonder, is the entire company slow to change? Good grief.

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Dave G Says:
November 20th, 2008 at 8:27 am

It’s like I said before. They will use some or all of the $25B for retooling as a stop-gap to last until mid-2009. After Jan 20th, there will be a president and many more senators who are in favor of strengthening the U.S. automobile industry. So I’m sure there will be another, more well thought out package before mid-2009. The new government may also help facilitate the Chrysler-GM merger.

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statik Says:
November 20th, 2008 at 8:35 am

Here is another good one:
—–
Chrysler Canada seeks C$1 billion in aid-report

TORONTO, Nov 20 (Reuters) – Chrysler Canada Inc [CBS.UL] has asked the Canadian and Ontario governments for C$1 billion in financial assistance to help it through the global economic crisis, making it the first Canadian automaker to specify how much it is seeking, the Globe and Mail reported on Thursday.

http://www.reuters.com/article/marketsNews/idINN2038971520081120?rpc=44
————–

Apparently no Chrysler exec has watched Canadian television or read a paper here. Chrysler stands to get about 6 billion out of the ‘retooling’ loan and it thinks it can pull a billion out of Canada? Bonne chance

I myself might as well have applied for a billion dollars. The government is doing everything it can to try and push out a balanced budget here and we are going to ship off a billion dollars?

Lets talk scale in Canada.
Chrysler has a carboard box of a HQ here and 3 piddly plants, you can’t even call them all plants. The Etobicoke ‘plant’ has less than 400 people at it. The other two are at about 3K and 4K respectively. All of the HQ and subsidiaries combined have about 900 at last count.

So max head count, 8,500…and shrinking. Lets say 6,000 by the end of next year. So we could give Chrysler $1 billion -OR- a check to each employee for $166,666. I wonder what the employess would choose, I wonder what would keep more money in Canada…hrmmmm. (not like that would ever happen either…just a coloUrful illustration)

Long story short —take off Chrysler, you hoser. We haven’t put out 11 annual balanced budgets because we are idiots. (Although this year we may not make it because of our agreement to participate globally in the ’stimulus program’…but you can’t live in a cave, you have to do your share).

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Dave G Says:
November 20th, 2008 at 8:36 am

#21 nasaman Says: “My proposal is for Congress to pass legislation necessary to fund the GSA (General Services Admin), who have long procured cars and trucks for most of the rest of the Federal Government (except for the Armed Services, of course), to place massive orders …”
————————————————————————————–
Obama’s energy plan is on record:
• Within one year of becoming President, the entire White House fleet will be converted to plug-ins as security permits; and
• Half of all cars purchased by the federal government will be plug-in hybrids or all-electric by 2012.
More info here:
http://www.barackobama.com/pdf/factsheet_energy_speech_080308.pdf

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Jason M. Hendler Says:
November 20th, 2008 at 8:37 am

The $25 billion for retooling to be used to continue operations is just a stop gap measure until Obama can take office. At that point, they can work on more comprehensive legislation for how our auto industry is restructured. I recommend the government buying non voting, preferred shares from the big 3, giving them a cash infusion, with instruction for the cash infusion to be used for more fuel efficient cars, while restructuring exec salary and union pay / benefit levels.

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Dave G Says:
November 20th, 2008 at 8:39 am

#20 dc Says: “I just dont see the point in giving them 25 billion. Whats that a few months burn rate for the Big 3? Big deal. So they’re back in the handout line again in February?”
————————————————————————————–
More like June.

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Dave B Says:
November 20th, 2008 at 8:46 am

#21 Nasaman:

Why not require them to manufacture electric vehicles? No plug–no funding. That’s a stipulation that they cannot hide from.

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Rashiid Amul Says:
November 20th, 2008 at 8:47 am

Nasaman # 21.

The only thing I would change with your idea is that the GSA should only buy American vehicles.

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Dave G Says:
November 20th, 2008 at 8:47 am

#27 Jason M. Hendler Says: “…giving them a cash infusion, with instruction for the cash infusion to be used for more fuel efficient cars, while restructuring exec salary and union pay / benefit levels.”
————————————————————————————-
As I understand it, union pay isn’t a big issue. Toyota and Honda pay similarly in the U.S.. The main issue is benefits, namely health care and retirement. But GM has already addressed these issues fairly well. The problem is that the new union benefits deal doesn’t kick in until 2010.

As for executive salary, I agree. When a company is doing well, you can afford to pay execs high salaries. But when the company is on the verge of bankruptcy, then execs should make a lot less. We need corporate execs that are in it for the long run.

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statik Says:
November 20th, 2008 at 8:53 am

It is another finance thread, so I’m going to treat it as such, Jobless claims out this morning:

——————————-
Jobless Claims Hit 16-Year High, Above Forecast

WASHINGTON (AP) — New claims for unemployment benefits jumped last week to a 16-year high, the Labor Department said Thursday, providing more evidence of a rapidly weakening job market expected to get even worse next year.

The government said new applications for jobless benefits rose to a seasonally adjusted 542,000 from a downwardly revised figure of 515,000 in the previous week. That’s much higher than Wall Street economists’ expectations of 505,000, according to a survey by Thomson Reuters.

That is also the highest level of claims since July 1992, the department said, when the U.S. economy was coming out of a recession.

The figures likely will cause some economists to increase their projections for the unemployment rate this year. Many already expect unemployment to reach 7 percent by early next year and 8 percent by the end of 2009.

The rate in October was 6.5 percent, and last year the rate averaged 4.6 percent.

http://finance.yahoo.com/news/Jobless-claims-jump-apf-13630380.html

http://www.cnbc.com/id/27819472
——————————–

/more ramping structural damage

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Gordon Green Says:
November 20th, 2008 at 8:54 am

Many small companies were counting on a small part of the $25 billion for retooling. Tesla Motors applied for $400 million for their sedan factory. I can think many other small electric car companies and associated suppliers that expected funding from this law.

Hopefully, in changing this law, they don’t abandon the small pioneering electric car companies.

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dc Says:
November 20th, 2008 at 8:58 am

#28 Dave

The $25B was for all 3, $12B was for GM – who depending on what you read is burning between 2 and 6B a month. How does that get them to June exactly?

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Firefly Says:
November 20th, 2008 at 9:04 am

#21 Nasaman

I could not have put it so eloquently. You are exceptionally on point. I have always had a problem with contract and manufacturing jobs going to overseas companies. Make these companies stay here and support the US infrastructure…or they fail.

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Tim Says:
November 20th, 2008 at 9:05 am

Let me get this straight…

The Democrats and NeoCon LIBERALS would agree to changing the retooling pork into bailout pork IF it were attached to a bill that included MORE pork for those who would lose their $40.00/hr union jobs because that made their employers noncompetitive?

Typical.

What about the resulting $Dollar HYPERINFLATION which will starve us all?

What about that Constitution thingy? You know, it includes the 10th Amendment which says they CAN’T do these types of things and they ALL swore an OATH on the Bible to uphold it!

Lying thieves!!!! (no honor, no integrity, no courage, no sight)

There is an especially warm place waiting for Liberals, NeoCons and other hypocritical thieves when they pass on!

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Murray Says:
November 20th, 2008 at 9:09 am

Here is a cut/paste from an opinion piece I read last night….single best article I’ve read about this whole mess (besides Statik’s posts of course)

This guy (named Mark Lange) has the opinion that if federal money is to be used that the one major condition is that it is used to aid the process of Chapter 11 ….

(I tried to post the link for the whole article but it no worky)
__________________

“Don’t just bail – rebuild
If the industry were to start over today, it would have enviable assets: 100 years of know-how. Real progress in automation and productivity. A nation passionate about cars, and steeped in innovation.

The reforms Detroit needs may sound radical, but they’re not unreasonable. And they’re essential if we want to avoid making a $25 billion bridge loan to nowhere:

•Offer the best “retooling assistance” available: Chapter 11 protection from creditors. That will provide both the time and the incentive for real restructuring and stable job creation.

•Fill GM’s board with enough seasoned aerospace, electrical engineering, and technology hands that they make up a majority – and have them determine how much of current management stays on.

•Give management the right tools to renegotiate existing debt and get out from under excessive dealer contracts and expensive leases for unused facilities.

•Renegotiate labor contracts, bringing pay and benefits (at GM, it’s $71/hour) in line with Toyota’s US operations ($47/hour), and providing profit sharing and stock plans.

•Amp up the plug-in hybrid Chevy Volt. The company’s future depends on its ability to master technology that doesn’t defy the laws of nature. Which means…

•Shut down Chevy’s hydrogen-car fantasy. Beyond the untold billions needed for retail hydrogen infrastructure, hydrogen is the most codependent atom on earth (it hates to be alone). The electricity needed to pry it from water far exceeds its energy as a fuel.

•Scale down the consumer truck and SUV businesses, and consolidate product lines. (Quick: What’s the difference between Pontiac and Buick?) Shut down excess plant capacity, now estimated at four million cars a year.

•Don’t allow mergers. A long history of failed ones (remember Daimler-Chrysler?) shows that more scale is the last thing they need.

•Fully fund unemployment insurance and healthcare for all affected workers – but make those benefits contingent on enrollment and success in retraining programs, so that they get the skills relevant to better-paying, more secure jobs.

•Then, provide the $25 billion in loan guarantees, with the government first in line to be paid back – in exchange for company stock with voting rights and board seats, to be held by a public-interest troika: a new “auto czar,” plus the secretaries of Labor and Commerce.

Customers will initially be leery of purchasing anything as significant as a car under the stigma of bankruptcy. But revitalizing board and executive leadership – and funding and guaranteeing warranty service through recognized national service chains – will send the right signal while they reorganize.”

________________

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Jean-Charles Jacquemin Says:
November 20th, 2008 at 9:11 am

Jim I #16

“So what do the automakers expect to do for income over the next few years while people wait for the new technologies? Unless my car dies on me, I am waiting.” That’s exactly what I am doing now.

JC

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Dave G Says:
November 20th, 2008 at 9:13 am

The whole pay structure in the auto industry should be reworked. There should be less salary and more profit sharing. The higher up in the company you are, the more profit sharing you would get.

Executives would receive the majority of their pay through profit sharing. Their salaries would be very low relative to other executive salaries, so their compensation would vary dramatically as profits change. No more multi-million salaries for CEOs.

To keep a longer term vision, most of the profit sharing would be averaged over a number of years. This would discourage “get rich quick” schemes that damage the long-term viability of the company.

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tripwest Says:
November 20th, 2008 at 9:14 am

China is chomping at the bit…GM will be home based in China before going bankrupt. They have the money and the desire.

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Dave G Says:
November 20th, 2008 at 9:22 am

#34 dc Says: “#The $25B was for all 3, $12B was for GM – who depending on what you read is burning between 2 and 6B a month. How does that get them to June exactly?”
————————————————————————————–
IIRC, GM had $16B on hand last month, they need $11B to be viable, and they are burning $2B/month, which means they will last until early January. Add $12B, and they will last 6 months more.

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kdawg Says:
November 20th, 2008 at 9:25 am

#32 statik
The figures likely will cause some economists to increase their projections for the unemployment rate this year. Many already expect unemployment to reach 7 percent by early next year and 8 percent by the end of 2009.
————————-

Been there done that. We (Michigan) have been pushing 8,9,10% unemployment for sometime. I see us in double digits soon, bailout or no bailout.

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Jean-Charles Jacquemin Says:
November 20th, 2008 at 9:25 am

Nasaman #21

Great, I supposed you were a keynesian. Now I’m sure you are (like myself).

Those last twenty years keynesians have been attacked by orthodox liberals because they advocated “too much” regulation.

Today we are sure of one very sad fact : the orthodox liberals have lost and the market has (savagely) won (the automatic autoregulation of the financial sector has worked but not in the direction the orthodox liberals thought it was).

So we are left with two options, a centrally planned economy and we know it does not work very well or a limited and controlled state intervention like the one you advocate.

Regards,

JC

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Dave G Says:
November 20th, 2008 at 9:32 am

#37 Murray,
Good article.

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Jean-Charles Jacquemin Says:
November 20th, 2008 at 9:35 am

Rashiid #30, Firefly #35

Sorry you both, this is a return to the protectionism that has been so dangerous and lethal in the ’30’s.

The USA have still the “Buy American Act” of 1933 (http: // en.wikipedia.org/wiki/Buy_American_Act) so bothering in international trade negociations. If above that, the USA are more restrictive in the public procurements, retaliations under WTO rulings could negatively affect the US trade balance.

Regards,

JC

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Dave G Says:
November 20th, 2008 at 9:39 am

#43 Jean-Charles Jacquemin Says: “So we are left with two options, a centrally planned economy and we know it does not work very well or a limited and controlled state intervention like the one you advocate.”
————————————————————————————–
I don’t understand liberal or conservative conecpts. I’m a pragmatist. When the economy is doing great, then government should mostly get out of the way. When the economy is in the dumps, then government should get involved in a big way.

So government involvement should always be dynamic, and vary according to current conditions.

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DonC Says:
November 20th, 2008 at 9:49 am

#21 nasaman

Replacing the existing GSA fleet with green cars is not a bad idea. It dovetails nicely with the goal of a million plug in hybrids by 2015.

The problem, however, is that it’s too slow for the current situation and it doesn’t deal with the legacy costs which the Detroit automakers do really need to jettison. (Waggoner also needs to go, it’s obvious he’s out of touch and has been at GM so long he’s incapable of anything fresh and innovative).

Basically your idea is a perfect follow up but it presumes some solution for the current financial crunch they are in. As you know, even if the bill authorizing the purchases was passed on January 20 it would take GSA six months to put out the RFPs. Something needs to happen before then. In this regard, it is strange indeed that it’s taken the auto makers so long to apply for TARP funding for their financing arms.

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DB Cooper Says:
November 20th, 2008 at 9:56 am

“The USA have still the “Buy American Act” of 1933 (http: // en.wikipedia.org/wiki/Buy_American_Act) so bothering in international trade negociations. If above that, the USA are more restrictive in the public procurements, retaliations under WTO rulings could negatively affect the US trade balance.

Regards,

JC”

Balance ? What balance ? There is no trade balance. To most of the world, the term ‘trade’ means to export goods to the US in trade for US dollars. Why do you think the Asian markets have gone right in the crapper along with our level of disposable income ?

The one and only Liberal principle I’m in line with is the advocation of ‘fair trade’ over ‘free trade’. In other words, it’s fine to allow imports without restrictions from a nation that allows us to do the same in return; but it’s also necessary to erect barriers in response to those nations that have barriers of their own.

I’m a pragmatist. “Do unto others as you’d have them do unto you” is a nice idea but it doesn’t work. “Treat others the way they treat you” is a heck of a lot more practical.

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DonC Says:
November 20th, 2008 at 10:01 am

#46 Dave G – “So government involvement should always be dynamic, and vary according to current conditions.”

OMG. Don’t you realize that you risk subjecting yourself to ridicule by being so obviously right? Ba ha ha ha ha ha.

There is a corollary here, and that is the idiocy displayed by the many who decry large government on the one hand and then demand more defense spending on the other, seemingly missing the rather obvious point that defense spending is the most dangerous type of spending for a democracy, for not only is it primarily spending rather than investment (as opposed to bridge building for example), but it also directly threatens freedom by arming politicians to the teeth.

But yes, counter-cyclical spending and attention to the infrastructure needs of the economy have been proven to work throughout the centuries. Seven thousand years ago the Pharaohs figured out that storing grain in times of good harvests and releasing grain in times of bad worked well to keep the economy humming and had the salutary effect of keeping themselves in power. If that isn’t current enough, you can just listen to Barton Biggs who wants at least a trillion dollar stimulus, which seems large but of course is still less than what we have spent in Iraq to our detriment.

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Jean-Charles Jacquemin Says:
November 20th, 2008 at 10:03 am

Dave G #46 :

“I don’t understand liberal or conservative conecpts. I’m a pragmatist. When the economy is doing great, then government should mostly get out of the way. When the economy is in the dumps, then government should get involved in a big way.

So government involvement should always be dynamic, and vary according to current conditions.”
————————————————————————————–
OK Dave sorry to have been too academic.

May I say that what you advocate, if it seems at first view make a lot of sense, is in fact a situation where the profits are privatized among the (relatively) few ones that seize this opportunity and the losses are socialized among all the taxpayers.

This leads to a very inequitable situation with a great inequality of post tax income between citizens.

The last twenty years in the financial sector and in the USA have been a return not to the “free market” but to the “laissez faire laissez passer” of the nineteenth century during with the lack of regulation allowed oligopolies and monopolies to take over with as a consequence the big overproduction crises between 1880 and 1900.

The reaction to those crises has been the establishment of “free markets” that is market situations where the governments ensured competition, control of the financial sector, social regulations, etc. … and direct countercyclical (keynesian) interventions in the economic system (accumulate public financial reserves when the situation is going well, spend when you are in crisis).

Since the 80’s the deregulation process has been initiated under R. Reagan and M. Tatcher. And it has been proved that if some deregulation was in fact effective, too much deregulation could kill people (like the train passengers in U.K.) and leave the finance people to themselves (not a good idea, we know what Law has done in France at the end of the eighteenth century with “la crise des assignats”, he invented a “toxic” asset like the finance people have done today, nothing new).

So the ones who have gained credit during the current crisis are the “keynesians” , i.e; the ones who think that a reasonable intervention of the state is ALWAYS necessary to ensure a proper functioning of the markets and a minimal equity between citizens.

Regards,

JC NPNS

(Quote)
statik Says:
November 20th, 2008 at 10:05 am

#41 Dave G

#34 dc Says: “#The $25B was for all 3, $12B was for GM – who depending on what you read is burning between 2 and 6B a month. How does that get them to June exactly?”
————————————————————————————–
#41 Dave G says, “IIRC, GM had $16B on hand last month, they need $11B to be viable, and they are burning $2B/month, which means they will last until early January. Add $12B, and they will last 6 months more.”

————————-

Yarr, these be treacherous waters ahead matey.

Under the old conditions, max GM could see was around 6-7 billion. That makes them dead mid March. Now it could be re-written of course, but for myself I have to deal in ‘what is’ and not ‘what it could be’

Side notes: GM had 15.9 billion on hand Sept 30, 2008…puts them at around 11.9 end of November (provided they are holding the line with current 2 billion/month burn). Conservative estimate puts them at 11 billion on or around Devember 5th to 8th.

All that being said, the ‘11 billion’ is a absolute rock bottom, baseline guess. This whole thing could be done instantly. As soon as the taps are cut off for one critical component, the whole thing falls down.

Without the prospect of a bailout, you can be assured GM would already be filing for bankruptcy protection…all the suppliers/creditors are just holding off and waiting to see if GM gets a big bag of money, if this bailout actually died, completely today…GM is done tomorrow, they all go for the jugular.

(Quote)
nasaman Says:
November 20th, 2008 at 10:07 am

47 DonC et al………
——————————————————————————————————————————-
I don’t disagree that something like a bailout coupled with extensive restructuring needs to be done immediately. My proposal in #21 is what I believe would ideally be a vitally-important next step ……firm government vehicle procurement contracts for the big 3 to assure they get the green car movement well under way…… that should avoid the big 3 continually coming back for more bailout money (like Lehman Brothers has). After 3-4 years the newly restructured US auto industry should be pretty well on its own feet and producing millions of vehicles that represent the new state of the art among the world’s car makers (like Cadillac once claimed, the “standard of the world”).

(Quote)
Jean-Charles Jacquemin Says:
November 20th, 2008 at 10:16 am

DB Cooper #48

That exactly what I was trying to write : the “Buy American Act” of 1933 is hurting fair exporters to the US who are in turn fighting government procurement rules in foreign countries.

And, you are right, reciprocity is the key to cooperation in trade, so that if the US government is reserving the contracts of the new cars it could buy to only the big 3 (2.8) it creates a discrimination toward other US producers and foreign producers. That could lead to a profound trade dispute before the DSB of the WTO.

What it should try to do is to forbid offers from countries which still reserve their public markets to their domestic producers.

Regards,

JC NPNS

(Quote)
statik Says:
November 20th, 2008 at 10:20 am

In freefall:

GM
Thursday, November 20th, 2008, 10:19:
$1.71 -1.08 (-38.71%)

GM is within pennies of being defined as a small cap. (under 1 billion) Still a long day, anything can happen, lol.

(Quote)
statik Says:
November 20th, 2008 at 10:31 am

#44 Statik said (to JonP):
Wednesday, November 19th, 2008 at 8:40 am
http://gm-volt.com/2008/11/18/auto-company-ceos-testify-before-the-senate/#comments

If you have to play something, buy some puts on Caterpillar or somthing. I like this if you want to do a little market gambling and want to get right in there today and try and chase down that 20 points today, lol:

CATNI.X–Feb 09 puts ($45) @ 11.85
(Caterpillar closed at about 36 bucks yesturday)
http://finance.yahoo.com/q/op?s=CAT&m=2009-02-20

(Standard disclaimer: As always, invest at your own risk and do your homework, and don’t make me feel bad if you lose money, hehe)
=============================================

I don’t know if your out there lurking JonP, or you took me up on this. But the Feb 09 puts ($45) are now trading at $14.25 now, up from $11.85…just about exactly up 20%…in one day.

Sell ‘em now, take the money.

/pats self on back

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MarkinWI Says:
November 20th, 2008 at 10:36 am

Statik – I got MarketWatch reporting a low of $1.70 today, and currently trading at $2.14. Not that it matters much, but I’m just curious about what source you use for your numbers, and whether there is a Canadian currency conversion factor involved.

(Quote)
Samuel Says:
November 20th, 2008 at 10:37 am

Wow, never thought I would see the day where GM stock would be a $1.75 and Ford is about to break the $1 barrier. Someone could buy both of these comnpanies right now for dirt cheap, but then again why would they want to.

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Jim I Says:
November 20th, 2008 at 10:38 am

nasaman #21:

My only problem with what you advocate is that there is a great deal of differences between 1940 and 2008 in terms of debt and relationship to the gross domestic product (GDP).

In 1940 the US debt was about $40 Billion, and that was about 52% of the GDP. in 2008, our debt is over $10.5 Trillion, and it closing in on being 75% of our GDP. This does not even account for the unfunded Social Security, Medicare, and other obligations we have to pay for.

I guess my point is, that unless we get some people into elected office that have the nerve and will to get our debt under control, that it won’t matter if the auto makers survive or not. How long can we continue to spend money we do not have, before it all comes crashing down on us and our future generations?

Damn, this is depressing……

(Quote)
Jay Says:
November 20th, 2008 at 10:55 am

The Big 3, if necessary, should file for bankruptcy protection. If the normal DIP financing can’t be lined up, the government should step in and provide the loan. The upside is that the government can then take a short-term equity stake in the companies and then sell their stock on the open market providing a potential investment gain for tax payers.

No one wants to see these companies go out of business, but they will have to eliminate poor performing brands (i.e., Ford should drop Mercury and Volvo, Chevy should drop Hummer, Saab, and Buick, while Chrysler would need to drop Dodge). Also, they need to eliminate the job bank program and, of course, reduce pay and benefits to slightly below what Toyota, Honda, and Nissan pay their U.S. employees. Moreover, the pension plans need to be moved over to the government and they need to institute defined contribution plans. The bottom line is that unions are making it difficult for the Big 3 to turn a profit.

Finally, lets not forget that heads of management from the top down at all three companies need to roll with zero golden parachutes. Just fire them, which would send a very clear message to employees and car buyers that these companies are about to do 180’s. And for goodness sakes, get me a damn Opel 5-door Opel Corsa with a 1.3L CDTI engine in a Chevy showroom by Fall 2009, so I can get 62 MPG. If Chevy did this, I can’t imagine how many of these cars they would sell.

(Quote)
Cautious Fan Says:
November 20th, 2008 at 10:57 am

The Intrade betting markets currently place the chances of > 20 billion injection before Dec 31 at around 15% so I think it’s pretty fair to assume that we’ll get a front row seat for some fireworks. Looking forward to your upcoming posts Statik. You’re probably eating this stuff up.

Tried to post the link but it’s not working

intrade.com

(Quote)
statik Says:
November 20th, 2008 at 10:58 am

#54 Statik
In freefall:

GM
Thursday, November 20th, 2008, 10:19:
$1.71 -1.08 (-38.71%)
GM is within pennies of being defined as a small cap. (under 1 billion) Still a long day, anything can happen, lol
—————–
#56 MarkinWI
November 20th, 2008 at 10:36 am

Statik – I got MarketWatch reporting a low of $1.70 today, and currently trading at $2.14. Not that it matters much, but I’m just curious about what source you use for your numbers, and whether there is a Canadian currency conversion factor involved.
=================================
I’m streaming live quotes, thats what it was at 10:19 AM this morning (why I timestamped it and gave my disclaimer of ‘Still a long day, anything can happen’ ). It has bounced back since then a little bit, in line with the market. I just thought a almost 40% drop was significant enough to post on.

I have it trading at $2.04 -.75 (-26.88%) atm.

/no Canadian currency conversion, hehe. I trade in US dollars out of my US account.

(Quote)
Paul-R Says:
November 20th, 2008 at 11:05 am

I wish congress/Bush would quit farting around and get to the point. Say … OK if you want the money, here’s what you have to do. Take it or leave it. IMHO, congress is as useless and greedy as these CEOs.

And I agree 100% with one other post here … GM missed a HUGE PR opportunity here. Imagine if Wagner had driven there in a Volt prototype. Then when congress asked the corporate Jet question, he could have said…

“No, I drove here in a prototype of our Chevy Volt, which should be rated at 100MPG and be available in two years. Unfortunately, that may not happen now, since this congress pretty-much destroyed the US economy, derailing our long-term recovery plans that we already had in progress.”

That one statement could have put the American public on his side.

(Quote)
MarkinWI Says:
November 20th, 2008 at 11:13 am

Statik – thanks for the info, always a better way to skin a cat.

(Quote)
DonC Says:
November 20th, 2008 at 11:16 am

GM and Ford are down because Dingell is out, he’s lost his chairmanship to Waxman. I want to see GM survive but Dingell was far too close to GM. This is actually a good thing going forward and may actually help with any necessary bailout, er, rescue.

#50 Jean-Charles Jacquemin

Agree with most of what you are saying. However, your definitions are too rigid and academic. He’s not saying intervention is always necessary. Quite the opposite. He’s saying it’s sometimes necessary.

As for worrying about winners and losers: Our current system so favors the few at the expense of most taxpayers it’s not even funny. The mechanism for this are capital gain rates. Any distortions introduced by market interventions so pale in comparison as to become meaningless. In fact a good argument can be made that these additional distortions improve the situation.

(Quote)
Xzlon Says:
November 20th, 2008 at 11:20 am

If the big three CEOs had spent a day driving to the bailout hearings in a Cobalt, Focus, or Jeep the congressmen would have said anyone who would waste a day driving to the meetings obviously does not think big enough to run a company. It would have been interesting if the CEOs had turned the question around and ask “How long has it been since any one of you congressmen worked at something other than a taxpayer supported job and how many of you took a taxi to work this morning?”.

(Quote)
statik Says:
November 20th, 2008 at 11:33 am

UAW head Gettelfinger holding news conference at noon ET

SAN FRANCISCO (MarketWatch) — Ron Gettelfinger, president of the United Auto Workers union, is holding a news conference at noon Eastern Time Thursday at union headquarters in Detroit

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7b217984DC-7EFA-495B-A987-A5217356DF72%7d&siteid=yhoof2
——————-

Don’t know why, just thought it fit the thread.

(Quote)
omegaman66 Says:
November 20th, 2008 at 11:37 am

Alex S said

“”"The republicans think sending 700 billion to “FREE IRAQ” is a good deal, but don’t think rescuein automakers with 25 billion is important. The US automakers revenue almost 500 billion a year !!!!”

It is not that most Americans think 25 billion is too much it is the problem that it won’t fix GM only postpone their bankruptcy.

(Quote)
Jeff M Says:
November 20th, 2008 at 11:38 am

Sorry to keep posting this, but it’s very relevant for those who want to learn from history of why bailout is not the way, Chapter 11 is needed so GM can get out of the expensive union contracts, as otherwise they will NEVER be able to compete no matter how much money we throw at them!

A British Lesson on Auto Bailouts
http://www.nytimes.com/2008/11/18/business/economy/18car.html?_r=1&th&emc=th

(Quote)
Tim Says:
November 20th, 2008 at 11:39 am

Comrade Jacquemin,

You’re obviously ignorant of the facts, so I’ll try and help you…

It was Keynesian economics, Socialist central planning through the CRA and the MANY bureaucratic “investments” into THEIR preferred areas while taxing and regulating others out of existence and a central bank printing unlimited amounts of Fiat currency that caused the malfeasance (gov’t and private) which created the bubble in the first place.

How? The CRA (Federal central planning law) forced Fanny and Freddy (quasi-gov’t entities) to buy substandard loans so those with bad credit could own their own home and rebuild communities because “it takes a village”.

In order to comply with the CRA, the mortgage industry created weird mortgage products like “2/28” “3/27” balloons, 80/20 no money down etc and lowered their credit granting requirements. The private central bank (Fed) helped this process by adding “liquidity” (printing fiat money & issuing fiat credit to regional banks) which increased inflation.

This process caused the market to heat up and the housing values to artificially inflate. This creature came home to roost when people tried to refinance their balloons without the income to qualify for the new and now larger mortgage so they defaulted. As the default rates increased, so did the qualification on new and refinanced mortgages. People could no longer qualify to buy new homes or refinance which resulted in even MORE defaults. So the banks again tightened lending qualifications.

There is PLENTY of money to lend, but the banks are afraid to loan it to anyone without PERFECT credit and 20% down but all the defaults and over-leveraged (over priced) real-estate are making qualified borrowers/properties hard to find. THAT’S why banks & mortgage companies are holding onto or buying other banks or mortgage companies with the bail-out money instead of using it to help people refinance.

Use your brain, comrade! NO bank wanted to make these bad loans and lose money so the Keynesian central planning socialists (Democrats and NeoCons) in gov’t forced them to! Wall Street greed was a SIMPTOM of obeying a federal law, and NOT the cause! The CAUSE was socialist Central Planning and the false belief in Keynesian economics. The Austrian School predicted this collapse decades ago yet the Keynesians sad “all is well” just last year! In fact, the foolish Keynesians still believe that MORE equals “Change”.

There was absolutely NOTHING “free” or laissez-faire about the market since 1913 when banking was unconstitutionally given to the privately run Fed. The FREE market would have required a larger down payment, more interest, and a stronger credit rating that the CRA allowed them to BY LAW.

If you don’t understand this you are truly a FOOL!

Yet some here say “so government involvement should always be dynamic, and vary according to current conditions.” HELL NO! Bureaucratic central planners are NEVER smarter than the market!! Every nation which used it has collapsed of it’s own debt!

YOU socialists need to learn simple economics and the REAL and whole facts BEFORE you put you foot in your mouths again. Your just embarrassing yourselves with your own ignorance.

Visit http://www.mises.org to learn more about how Austrian economics can really FIX this problem through sound commodity based money and REAL capitalism, small central gov’t, humble foreign policy, no empire building and living within our means rather than spending ourselves into debt oblivion.

(Quote)
Jean-Charles Jacquemin Says:
November 20th, 2008 at 11:42 am

DonC #64

“In fact a good argument can be made that these additional distortions improve the situation.”

Agreed DonC.

Regards,

JC NPNS

(Quote)
Jean-Charles Jacquemin Says:
November 20th, 2008 at 11:49 am

Tim #69

Thanks to give us a lesson in orthodox liberalism. I do not think the government forced the banks, they were so eager to lend to marginal borrowers …

Regards,

JC NPNS

(Quote)
Jeff M Says:
November 20th, 2008 at 11:53 am

Another reason to know it’s a bad investment is that NO ONE ELSE wants to loan/give them money either! Apparently not even big oil (Exxon-Mobil, etc) which has a vested interest in Detroit… not only for producing oil burning vehicles, but if there would really be as many folks out of work if the automakers file chapter 11 (or even chapter 7) claim would be, that would cause demand for oil to drop even further (those folks left “jobless” tend to drive less).

Is there anything legally that prevents Exxon/Mobil from “loaning” Detroit the money? I think the oil companies combined probably pay out in dividends alone shows they generate too much cash they don’t know what to do with. However even big oil knows it’s a bad investment, that loaning them money is NOT going to solve the problems, only delay the inevitable (see the lesson from the Brits above)

(Quote)
mikeinatl. Says:
November 20th, 2008 at 11:58 am

Combining massive restructuring with NASAMAN’s idea at #21 seems like an excellent idea.

Changes in top management of the Big 3 and UAW should be part of that.

Hope the Volt can be saved somehow.

(Quote)
DonC Says:
November 20th, 2008 at 12:07 pm

#66 Statik – I saw that conference note as well. Maybe somebody is blinking? We’ll see.

#71 Jean-Charles Jacquemin – Very funny. Gave me a good laugh for the morning. You do realize your participation is raising the level of discussion. Are you sure you want to do that?

(Quote)
Big Picture Says:
November 20th, 2008 at 12:09 pm

Here’s an idea I’ve had for awhile; the timing might be very good for it now. Tell me what you guys think: the ability to easily lock-in the price for future use of gasoline. For example, with gas currently at $2/gallon, a person could purchase 1,000 gallons at $2.50, to be used at any time over the next year. Just have a gas debit card for it that you’d swipe at gas station. I haven’t run the math, but someone could that knows much more than me about the components involved: the retail supplier could use the futures mkt, the consumer would make the decision of whether or not the insurance premium is worth the reduced cash flow uncertainty, the wholesale supplier could see their uncertainy reduced. If the math works, this could be a HUGE product/service.

(Quote)
DonC Says:
November 20th, 2008 at 12:11 pm

#66 Statik – Looking at the conference. What’s the line: “Nothing to see here, move along?”

(Quote)
Edwin Mang Says:
November 20th, 2008 at 12:15 pm

Just a simple little bussiness person like me thinks that you need a plan that does not just make cars . You need a plan that covers the time that slow downs occur like now . The industry needs to invest in Geothermal plants that make money plus power the cars that they make . The income from those plants can lower cost plus improve income . The plants can power the plants and sell excess to the public . then look to what other things that go into the new cars to find other sources of income that will let the worker keep their pay and still compete with lower payed car companys , there is a Geothermal plant going on line in Nevada in Dec 08 . makes 50Mkwh at 120V . One plant plant should have a return of about $20,000.00
per hour . That is a wild guess at actual return but close enough for me .

I do get It but do you .

God Bless

(Quote)
Tim Says:
November 20th, 2008 at 12:16 pm

Comrade Jacquemin (#71)

Let me get this straight…

You believe that the banks were “eager” to loan their investor’s money at low interest rates to those with poor or marginal credit and insufficient collateral KNOWING that there would be a very good chance that they would not be able to collect, right?

Then please explain to me WHY the CRA even necessary? Why did comrade Barney Fwank have to push so very hard for it since the banks were so eager to make these bad loans anyway?

Only an idiot would believe that the banks and investment firms WANTED to lose money so they were eager to make bad investments without Federal Coercion!

Liberals (Democrat & NeoCon) and their central planning lunacy truly defy logic and common sense and THAT’S why it always fails in the end.

What’s REALLY so sad that is that they create so much pain on along the way.

(Quote)
BobS Says:
November 20th, 2008 at 12:20 pm

#75 Here in Atlanta I’ve seen gas as low as $1.78 and dropping. I don’t think your idea will get much traction when prices are falling.

(Quote)
Dave K. Says:
November 20th, 2008 at 12:26 pm

Mild hybrid technology is a good thing. Mild restructuring is also good thing.

Let the big 3 work their way through a restructuring. And let’s see what arises from the construction dust. The end product needs to be efficient and blue printed toward a realistic goal of selling quality vehicles. And operating within a positive cash flow. Even if this means on the fly adjustments to non profiting model lines.

The American public and the Obama administration will have no problem supporting a solid plan. And will be far more willing to TARP them, if needed, in the future.

Is anyone else getting sick of seeing the word TARP?

=D~

(Quote)
statik Says:
November 20th, 2008 at 12:29 pm

Statik (me) says, “UAW head Gettelfinger holding news conference at noon ET”
——-
#76 DonC says: “Statik – Looking at the conference. What’s the line: “Nothing to see here, move along?”
===================================

Yeah, just was looking at it. Here is the synopsis.

DETROIT (AP) — United Auto Workers President Ron Gettelfinger says the Bush administration and Congress need to come to an agreement on aid for the domestic auto industry because “inaction is simply not an option.”

At a news conference in Detroit Thursday, Gettelfinger acknowledged there is disagreement about how aid should be given, but “both the Bush administration and congressional leaders agree that immediate assistance is needed, and the cost of not acting would be devastating.”

http://finance.yahoo.com/news/UAW-head-says-inaction-on-apf-13633614.html
—————–

He also said without help, one or more of the Detroit Three automakers could collapse by the end of this year, and “the costs that would come from this are just too great.”

Hrm…I wonder which ‘one’ he was refering to collapsing before the year’s end, hrm…thats a real head scratcher.

(Quote)
statik Says:
November 20th, 2008 at 12:30 pm

BOOM! Crisis over.
Bipartism agreement.
GM up.

…see you in January

(Quote)
The Grump Says:
November 20th, 2008 at 12:38 pm

OK, I take back my “Yes, with strings attached” vote and change it to a “No bailout” vote.

Rick Wagoner showed me the error of my vote. He proved in the Congress bailout committee that he couldn’t reorganize his way out of a paper bag, and the UAW is fine with that – as long as they get their money.

Both Wagoner and the UAW are willing to risk the future of GM in a high-stakes game of “chicken” with Congress – they won’t reorganize without a bailout (or possibly WITH a bailout), and Congress won’t approve a bailout without a reorganization plan (I hope).

Congress, tell them to cut the pay if half, cut the UAW dues in half, no salary or other compensation above $249,999.99 a year (thanks, Mr. Obama), no golden parachutes, no private jet travel, and no business conferences at Las Vegas, Hawaii, Vail, etc – use teleconferencing instead. Then, we’ll talk about bailout.

GM’s executives and union employees need to “spread the wealth around”, as Mr. Obama puts it. I would hate to think of GM executives or UAW members as being “greedy”. (grin)

(Quote)
statik Says:
November 20th, 2008 at 12:39 pm

JonP, there is the second half of my answer to you about GM and what you should do with your shares from yesturday:

=====================================
#18 Jon P yesturday said,
“Assuming that the only place GM can get money for a chapter 11 is from the Fed…. Any predictions on how a bailout/chapter 11 combination might be handled? How will it affect the shareholders? (like me) (who thought they got a steal at $5.15 a share)”

———————————–

#40 Statik said,
Wednesday, November 19th, 2008 at 8:40 am
http://gm-volt.com/2008/11/18/auto-company-ceos-testify-before-the-senate/#comments

I don’t know if I would want to keep playing the GM stock game, but theoretically Wednesday/Thursday would be the low before the pop on rumoUr that the 25 billion is going through (I don’t know why everyone has not already put together the fact the first 25 billion is all but guaranteed).

I think you would be better off just holding the line right now, trying to get out at $4.00 and just take your losses on the other $1 and be happy
========================================

It ain’t at $4.00, but $3.30 is better than the $2.50 yesturday (or the lows of $1.72 earlier today).

/more general back pats for me

(Quote)
rickj Says:
November 20th, 2008 at 12:43 pm

Using statik’s advice, I’d almost feel like an inside trader.

(Quote)
statik Says:
November 20th, 2008 at 12:43 pm

Bipartisan group works to revive auto bailout

WASHINGTON (Map, News) – Aides to a bipartisan group of auto-state senators say they have reached a compromise to speed emergency loans to Detroit’s Big Three car makers.

Republicans and Democrats plan to present the proposal at a mid-afternoon news conference Thursday. But it was not immediately clear whether the compromise plan could draw enough support to get through a reluctant Senate.

It temporarily would divert to troubled automakers money from a program that currently finances the development of fuel-efficient vehicles. The aim would be to cover their immediate expenses

http://www.examiner.com/a-1701752~Bipartisan_group_works_to_revive_auto_bailout.html

(Quote)
rickj Says:
November 20th, 2008 at 12:45 pm

GM is climbing 1% every 10 seconds right now. Now steady at up 18%. Then instantaniously up to 23% gain. Now 24%. Fun ride.

(Quote)
statik Says:
November 20th, 2008 at 12:51 pm

#84 Statik

It ain’t at $4.00, but $3.30 is better than the $2.50 yesturday (or the lows of $1.72 earlier today).

/more general back pats for me
——————————–
Still going, 10 minutes later. Up to $3.80 now. Hope your out there and ready to sell Jon.

(Quote)
statik Says:
November 20th, 2008 at 12:52 pm

And there is $4.00 on GM. I have to know…did you put it the sell order @ $4.00 yesterday? There is going to be a whale of resistance I think at that number.

SELL SELL SELL

lol

(Quote)
Dave K. Says:
November 20th, 2008 at 12:53 pm

11/20/08 1231 EST

It temporarily would divert to troubled automakers money from a program that currently finances the development of fuel-efficient vehicles. The aim would be to cover their immediate expenses.

=D~

(Quote)
DB Cooper Says:
November 20th, 2008 at 12:53 pm

Tim @ 69

It’s nice to see that at least a small minority of us still ‘get’ it.

A great man once said (to paraphrase) :
- avoid unnecessary foreign entanglements
- avoid running up a national debt
- don’t put everything into the military industrial compex
- avoid forming into political parties

Can anyone identify the former president who left us with these thoughts upon leaving office ?

(Quote)
THOM Says:
November 20th, 2008 at 12:57 pm

#40
If GM builds most its stuff out of china, they will not be able to pry a nickel out of my hand!

(Quote)
statik Says:
November 20th, 2008 at 12:59 pm

Bipartisan group reaches last-ditch compromise for government auto industry aid

http://finance.yahoo.com/news/Bipartisan-group-works-to-apf-13633769.html

(Quote)
Jim Says:
November 20th, 2008 at 12:59 pm

I just want to say if GM goes bankrupt then every person in Michigan is going to be directly effected. This is not just going to bailout Gm, but every person in Michigan. If they go bankrupt then no one will buy any GM cars and we will go even further into recession.

(Quote)
kdawg Says:
November 20th, 2008 at 1:06 pm

60% swing.. weeeee

(Quote)
JEC Says:
November 20th, 2008 at 1:17 pm

This is really depressing…

“Honda Hires as Big Three Crash”

“At Honda, workers receive about $44 an hour, including benefits, while GM employees receive $73. ”

How can the Big 3 compete with such a huge wage differential? They need to file Chapter 7, then re-organize ASAP, before Honda/Toyota get their claws deeper into the Americas.

(Quote)
DonC Says:
November 20th, 2008 at 1:20 pm

#78 Tim – “Only an idiot would believe that the banks and investment firms WANTED to lose money so they were eager to make bad investments without Federal Coercion!”

I can only wonder where you get your information from. This seems like poor information even for talk radio and Fox News, but perhaps I give them too much credit.

The causes of the mortgage meltdown have been well documented. The bundled loans were rated as low risk based on faulty computer models that were wholly the product of a free market system. A bunch of the best and the brightest on Wall Street subscribed to the idea that all real estate is local, and that if you bundled “B” loans from Tampa and Seattle and Boston and Detroit together you ended up with a package of loans you could rate as “A”. The “free market” ratings agencies signed on.

Add to this the elixir of leverage which all on Wall Street always find irresistible, and a lack of regulation to rein in this excess, and you have the foundation for our current financial disaster.

You seem to think that actors in free financial can’t be butt stupid. Well from Tulip mania to Real Estate mania you’ve been wrong for thousands of years.

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JEC Says:
November 20th, 2008 at 1:20 pm

Statik..

“And there is $4.00 on GM. I have to know…did you put it the sell order @ $4.00 yesterday? ”

======================================
JonP
Do NOT answer that question!!!!

If you say yes, Statiks head is likely to become large enough to support all of Canada. The patting on back may be so loud we will hear it all the way in Southern Wisconsin!

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statik Says:
November 20th, 2008 at 1:21 pm

And now back to reality — $2.79. EVEN

/Jon, I hope you got out my friend

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Tim Says:
November 20th, 2008 at 1:37 pm

DBCooper (#91)

George Washington in his farewell address in May 1796 stated:

“The great rule of conduct for us in regard to foreign nations is, in extending our commercial relations to have with them as little political connection as possible. So far as we have already formed engagements let them be fulfilled with perfect good faith. Here let us stop.”

The ONLY Republican or Democratic candidate in the 2008 Presidential election who would have HONORED his OATH to the Constitution and IMMEDIATLEY brought ALL the troops abroad home was Dr. Ron Paul. Obeying the Constitution includes NO undeclared wars, NO military bases occupying foreign countries, NO using OUR tax money to bribe leaders of foreign countries, and NO top-down central planning socialists federal gov’t.

Why? The 10th Amendment states:

“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

If you can “interpret” or ignore this supreme law, you can Interpret or ignore any and EVERY law.

Obey the Constitution! If you don’t like it then properly Amend it.

Politicians and judges interpret and ignore the Constitution at their own peril.

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Cautious Fan Says:
November 20th, 2008 at 1:50 pm

#97 DonC

Unquestionably, free markets make mistakes. However, history has also teaches us that centrally controlled markets make large mistakes as well (Russia, 1930’s, 1970’s), and free markets correct the mistakes far more quickly. On this recent issue, regulators & politicians were on the wrong side, goading on the markets to help poor people afford housing. Who jumped first….well I suppose you’ll decide based on your prexisting presuppositions.

Since both make mistakes, we have to decide who we should trust MORE
1) Trust a lying politician to act in my interest
2) Trust a greedy banker to act in his own interest

The greedy banker has every incentive to make better decisions, while the politician has few incentives to make the right decision. Overtime then, you’ll see the free person making better decisions.

#69 Tim

Buried in that rant was an interesting idea. We don’t centrally control many other critical areas of the economy (food, gasoline, etc) so why does the money supply have to be centrally controlled?

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DonC Says:
November 20th, 2008 at 1:51 pm

#96 JEC – “At Honda, workers receive about $44 an hour, including benefits, while GM employees receive $73. ”

These numbers are somewhat misleading. They’re stale — I think they’re from 2006. Moreover, after the last renegotiation much of the difference will disappear by 2010. Now that may be too little too late but it’s not the huge gap going forward as these numbers suggest.

I’ve been trying to find what the UAW or the Detroit CEOs mean when they say the gap will be “virtually eliminated” but I haven’t been able to find any numbers on this. In any event it isn’t anything like what these numbers suggest.

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Tim Says:
November 20th, 2008 at 2:02 pm

DonC (#97)

I see you’re sipping the CNBC social programming TV cool aid again. It will rot your brain, buddy.

Mortgage loans are made one at a time. EACH mortgage is subject to strict FEDERAL FDIC (central planning ) qualifications BEFORE the loan is granted.

Again, mortgages are VERY strictly federally regulated. Once issued, they are bundled before being sold to wall street, but this is for simplicity because investment funds buy multi-million dollar investments, not $250K ones.

The smoke and mirror excuse fed to you on CNBC is just the socialist’s way of passing the “it’s not our fault” buck.

They use this whining excuse often to pass blame for the unintended consequences of their central planning failures on to someone or something else like Free Choice or Free Market.

You know that arrogant socialists HATE freedom because everyone BUT them is too stupid to make the right choices.

Typical liberal behavior:

“It’s not his fault that he’s a murderer. He must have had bad parents, anger issues, been insane or, or it’s that damn gun that killed his wife. We need to stop those mean guns. I feel that they HATE me too much. I FEEL your pain.”

Get over yourself, already!

B.S.!!!!

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DonC Says:
November 20th, 2008 at 2:22 pm

#101 Cautious Fan

I am decidedly not a fan of central planning and most decidedly a fan of free markets. However, as has been pointed out, free markets are not the antithesis of government intervention since they depend on government intervention for their existence (enforcement of property rights and laws against price fixing and so forth). This leads to the rather obvious conclusion that it’s important that the intervention be appropriate.

The other point is that in some instances government is the only means for getting major things done. For all kinds of reasons markets are not useful in fighting wars, building highways systems, establishing standards, enforcing savings, and so forth.

In any event, developing a fantasy that the financial meltdown is the result of government action in order to justify your ideology concerning the infallibility of free markets isn’t a productive path to go down.

As to your question about whether I’d like to make decisions or whether I would rather have a politician make them for me, the only right answer would be that it depends on the issue and the politician. Unless of course you’d prefer to make decisions yourself about flying the jetliner rather than letting the pilot do their job. I avoid picking stocks because I don’t believe I can compete with professions who are smart and spend their life doing that for a living. By the same token I don’t believe I can make better decisions about the economy than smart politicians who spend their time in committee hearings listening to Nobel prize laureates outline proposals for stabilizing the financial system. (If you’ve noticed I’m also not inclined to second guess the Volt engineers – same principle). On the other hand, there are plenty of politicians, like the annoying little jerk from Texas I saw yesterday, who couldn’t find a right answer if one hit him over the head. It depends.

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DB Cooper Says:
November 20th, 2008 at 2:30 pm

Personally, I’d rather not trust a politician to make many decisions for me. Do any of them have any background in economics ? mathematics ? business ? anything relating to problem solving ? not many.

The vast majority are attourneys whose specialty talent is simply getting elected to office. Once there, their main concern is avoiding responsibility and working on getting re-elected.

Looking regal isn’t a very useful skill; but it can land you a great $160k/year parttime job with excellent perks.

(Quote)
DonC Says:
November 20th, 2008 at 2:39 pm

#103 Tim – “Mortgage loans are made one at a time. EACH mortgage is subject to strict FEDERAL FDIC (central planning ) qualifications BEFORE the loan is granted.”

There is a line between being misinformed and being a whack job.

The FDIC has nothing to do with mortgages. It has to do with insurance. This would seem evident from its name: Federal Deposit Insurance Corporation. You put your money in an FDIC insured institution, and if it fails the FDIC pays you your money back. It’s funded by a small charge on bank deposits. Very simple. Nothing to do with mortgages. Nothing to do with the financial meltdown.

I suspect, but don’t know, since you probably wouldn’t know, that you are thinking about Fannie and Freddie Mac, which are quasi governmental bodies who underwrite conforming loans. But by definition subprime and Alt-A loans are not conforming, so those loans, which are what constitute the “toxic assets”, were written entirely by private banks and placed with other private lenders without any government intervention whatsoever.

As to your suggestion about viewing habits, I don’t spend a lot of time watching CNBC but I’ve seen it from time to time. I’ve also watched Bloomberg. You might want to try it. Reading wouldn’t be a bad idea either. Perhaps a little research on the FDIC? You might find it illuminating.

My final question is this: Why is it that everyone who can’t construct a grammatical sentence of spell always arrogates to themselves the mantel of “patriot?” Is it patriotic to be a fool?

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kdawg Says:
November 20th, 2008 at 2:52 pm

OK, everyone is saying the same thing they always say on every financial thread and we’re over 100 comments now.. time for a new thread Lyle.

Edit: i see there is a new post.. nevermind

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omegaman66 Says:
November 20th, 2008 at 2:54 pm

DonC apparently you are a Socialist and don’t even know it. You still hold on the the idea that if done right the govt can do a better job than they have done in the past. Sounds good on paper but it has never flown and never will.

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Tim Says:
November 20th, 2008 at 2:56 pm

Well, it looks like DonC (#106) needs more “schooln:

http://www.fdic.gov/regulations/compliance/mortgage/preq2.pdf

FDIC insures banks that give loans and mortgages so they are VERY interested in requlating their actions.

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DB Cooper Says:
November 20th, 2008 at 2:56 pm

“My final question is this: Why is it that everyone who can’t construct a grammatical sentence of spell always arrogates to themselves the mantel of “patriot?” Is it patriotic to be a fool?”

I love irony Thanks.

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N Riley Says:
November 20th, 2008 at 3:23 pm

#46 Dave G

“So government involvement should always be dynamic, and vary according to current conditions.”

——————–
We all know that when government gets involved they stay involved. They never know when to turn loose. They become the big pig in the corner pen (my apologies to the pigs of the world).

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D'Artagnon Says:
November 20th, 2008 at 3:39 pm

Visa vi the Federal Reserve system, this country’s financial system has been governed by Keynesian macroeconomics for the past 70 years. Keysesian economics is how we got to where we are.

Interestingly, everything predicted by the Austrian school of economics has happened — including our current set of predicaments.

These facts suggest — along with the failure of Government Sponsored Enterprises “Fanny Mae” and “Freddie Mac” — that more government meddling in the economy is not the solution to our problems. A return to sound national fiscal policy, OTOH, would be helpful and very much in order.

Best regards,

D’Artagnon

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Cautious Fan Says:
November 20th, 2008 at 5:29 pm

#104 DonC

Agreed. Gov’t intervention is sometimes required. But there must be a consistent philosophy on when. I’m interested to hear yours. Mine is gov’t exists to protect “commons”, or things which everyone has an incentive to abuse and will therefore never happen. Use of radio spectrum, property rights, individual rights, public defense…those are commons. However, if individuals have an incentive to do the job, gov’t should stay out and let people be FREE. Whenever the gov’t gets involved, in some sense, they’re going to remove people’s freedom to act on their own.

Your trust in a politician genuinely puzzles me. Do you really think a politician listening to a Nobel laureate is in a good situation to make economic decisions? The soviets had plenty of genius economists, it doesn’t matter. Getting the smartest people doesn’t help here. The amount of information is far to vast for any single person or group of people to handle. In addition, they have no incentive to handle this information efficiently (they’re politicians). Better to let the people who have both the information and the incentives to handle it. The actual people involved.

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Jean-Charles Jacquemin Says:
November 21st, 2008 at 8:34 am

DonC
Tim
Noel

and others who are interseted :

I met – as announced (Comrade Tim) Jared Diamond – last Monday.

We were speaking about his famous book “Collapse”.

There is one lesson to keep in mind : it takes the courage of some governments, institutions, single individuals, … to go against the wind and reform the sytems in which they live to avoid the collapse.

This is called interventionism.

Be well,

JC

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