AND 
Automaker Survival Package Moves Closer to Reality, but Sticking Points Remain
After Friday night’s breakthrough when key Democrat Nancy Pelosi agreed to allow automaker loans to come from previously earmarked retooling funds, momentum has built to achieve a passable bill to give GM and Chrysler immediate loans. Timing is critical, as GM has said it would collapse by the end of this month without them.
On Saturday, negotiators sat down to work out the details of the loan package expected to be from $15 to $17 billion. Though several issues need to be resolved, reports indicate that it now “appeared more likely that the rescue package could get through the House and Senate.”
Republican support appears to be building, but Bob Corker (R-Tenn), star of Thursday’s Senate Finance Committee Hearing, said he was unhappy with the way the plan was shaping up. He said “based on the outline we’ve seen so far, we are disappointed.” He wants the bill itself to have agreements in place to cut autoworker wages and legislate extensive reductions in debt owed to debtholders in exchange for the aid.
Also key Democrats want to make sure the bill requires automakers to be held regionally to California’s greenhouse gas emission standards that 17 other states have now either adopted or plan to adopt. GM has traditionally fought against that because of the difficulty they say of making cars that are specific to the demands of individual states.
It is expected the final legislation will go to the House for votes first, where passage is most likely, and the Senate after that, early next week.
The legislation’s goal appears to be to get GM and Chrysler to the end of the first quarter of 2009. At that point, the additional loans they requested could then be provided by the Obama administration and a new Congress.
Source (Detroit Free Press)
87 Responses to “Automaker Survival Package Moves Closer to Reality, but Sticking Points Remain”
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December 7th, 2008 at 8:15 am
Boycott GM, let Chrysler die and support genuine American brand: Ford and Lincoln.
(Quote)
December 7th, 2008 at 8:23 am
The loan needs to be granted. We need to build 250,000,000 E-REV’s and 250,000,000 Solar-Wind Personal Electric Vehicle Recharging Stations. This would equate to $12.5 Trillion in GDP…. What’s the problem?
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December 7th, 2008 at 8:44 am
#1,
What are you talking about? GM and Chrylser are “geniune” American brands too.
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December 7th, 2008 at 9:08 am
I like the look of the new Cruze sedan. Start cranking out E-REV versions of both the sedan and the small SUV ASAP. They will be more popular than the early Mustang models.
http://garfwod.250free.com/Photos/Cruze_sedan.jpg
=D~
(Quote)
December 7th, 2008 at 9:09 am
That was really boring… I couldn’t even read it all, lol.
I don’t know all the details, but I think Chrysler should die, just as Saga gaming consoles died. Maybe they could sell their Dodge line to GM or Ford, similar to how Sega now sells their games under Nintendo.
Sega is doing fine now, so I think Chrysler should consider the same ending.
(Quote)
December 7th, 2008 at 9:27 am
I agree, Chrysler should go. Cerberus would lose two billion, but that’s capitalism. Their lobbiests are hard at work trying to get a merger written into this thing to save them, but I hope congress resists this. It is being pitched as a cost savings and I am afraid the bait is being swallowed. GM is trying to dump brands now, what do they need with a bunch more?
GM is talking about dumping Saturn, I think that is their best brand. It must be that old GM doesn’t like Saturn. I know several folks that bought their next vehicle from our local Saturn dealer because the service is top notch. That dealer is also the only dealer that I have heard recommended again and again (mainly because of the service).
I think the Cruze looks good.
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December 7th, 2008 at 9:53 am
If they are going to dump Saturn, then why are they advertising it so much lately on TV???
I sure would not think too much about buying any model from that line, if it is on the chopping block and going to disappear in the next few months….
It just doesn’t add up.
(Quote)
December 7th, 2008 at 10:02 am
Sooo many Wall street companies (which employ very few, very rich people) were listed as “vital to the economy” and “critical needing Washington funds” while companies that actually build real things and employ, directly or indirectly, millions of average to lower class people are now getting the run around. Who do you suppose contributes to political campaigns?
I actually think the government should not have touched any companies. Bad banks should fail, bad car companies should fail. If you are going to do the opposite and hand out money, then you should spend money where it does the most good. Our government is doing neither.
The US government responses to these financial crises will be judged by history as the ultimate examples of the failures of a cronist government that had settled into a era of incompetence and inability, brought on and perpetuated by a solidified two-party system stagnated in inter-party bickering and self-preservation. The concepts of service for the greater good, vision and nobles’ oblige have been lost.
Buh-bye GM,. Buh-bye Chryster. Buh-bye retirement. Sadly, buh-bye Volt.
It is time to start talking about where the Volt technology and engineers will be going, and who will make the first plug-in hybrids.
Where do we go from here? I’ll loo to Statik to keep an eye on those kind of details and update us.
The Volt is Dead, Long Live the Volt!
(Quote)
December 7th, 2008 at 10:02 am
“Also key Democrats want to make sure the bill requires automakers to be held regionally to California’s greenhouse gas emission standards…”
Are you kidding!!! Now isn’t the time to put stricter emissions standards on a company that has 3 weeks worth of cash on-hand. Especially, when GM has already stated that E_Flex will be the standard as soon as possible. Congress could ask for anything at this point, and GM would have to comply or close their doors.
Or, perhaps it’s a bone for the environmentalist contributors, only to be withdrawn at the the last minute.
(Quote)
December 7th, 2008 at 10:33 am
The loans appear to build a bridge to nowhere. 70% of dealerships selling 50% of vehicles and no corrective plan? Meanwhile 30% of dealerships sell 50% of vehicles from foreign corporations.
Technological displacement happens. When electricity replaced ice boxes with refrigerators, ice house workers lost jobs.
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December 7th, 2008 at 11:05 am
I really wanted a Volt, but I agree a boycott is the way to go if they get bailed out by our taxpayer money. I would rather buy a foreign owned brand produced in America like Toyota or Honda. If you buy a GM after a baliout you are really paying twice for the car – once with taxes, once more at the dealer. No thanks.
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December 7th, 2008 at 11:32 am
why is it such a bad thing? these LOANS will be paid back with interest once we all get our volts. Its not free money to GM…
Look at all the government handouts(japan) toyota recieved to build the prius. Look at how the prius sells today. This is no differernt for gm except that GM will be paying the money back…
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December 7th, 2008 at 11:45 am
I also find the idea of having California’s special greenhouse gas emissions standards for just 17 states ridiculous. They should be the same across the baord.
And why even try to copy California? Some of the environmental laws in California are ludicrous. Banning lead weights from car tires? Because, you know, they fly off MY car all the time! (That was sarcasm) I also remember seeing a garden hose’s packaging which said something to the tune of “Not labelled for sale in California”. So now garden hoses are somehow more dangerous in California too?
No wonder California is broke, if the state is run by environmental nut jobs…
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December 7th, 2008 at 11:46 am
boyott ? fools !!! it’s like saying you’re boycotting the american workers ….and taxpayers who will not have a chance to recoup the loan they gave to these automakers.
boycott yer ass sound more like it !
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December 7th, 2008 at 11:49 am
12 Nick D
“This is no differernt for gm except that GM will be paying the money back…”
================================
First, the more likely scenario will be that either GM goes bankrupt after receiving its first cash infusion (preferred to the next scenario). The second scenario is that GM is back to Congress in about 2 months, asking for the second installment.
Second, this is the US and we live in a capitalistic economy. Other countries can chose to do what they believe is the correct thing to help out its own. In the US we have survived by allowing the weak companies to fall (at least we used to) and the strong companies survive. If we bailout the automakers, then what industry should be bailout next? (PS: I was totally against the financial bailouts also, but no one asked me). How can you then deny bailout requests from any other company that says it is trouble? What criteria do you apply to determining who gets bailed out and who does’tn?
Let the automakers get loans from banks, like the rest of us. Oh, the banks won’t loan them the money? Well why not? Because they are to risky and the likely hood of not repaying is high. That’s just the way it is.
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December 7th, 2008 at 12:03 pm
This really is the right solution and should pass easily. It makes use of already approved funds and is not excessive. If our Congress does not speedily move this through to the President, then there is something seriously wrong. I really believe the 15 to 17 billion dollar loan package is the right thing to do, and keeps Americans working until Obama gets settled.
When the Obama administration gets to Washington, look for a much bigger package.
Have you all been reading about the new “Czar” role in all of this? I am not sure I like the idea of one person overseeing this loan.
http://oilfreenow.blogspot.com
(Quote)
December 7th, 2008 at 12:17 pm
From BBC News :
http://news.bbc.co.uk/2/hi/americas/us_elections_2008/7770129.stm
Obama vows aid for car industry
“The auto industry is the backbone of American manufacture”
“US President-elect Barack Obama says he will not allow the country’s car industry to collapse, but any state help must come with strict conditions.
The industry and its stakeholders would have to restructure, he told NBC television’s Meet the Press”
Good news,
JC NPNS
(Quote)
December 7th, 2008 at 12:22 pm
The biggest roadblock to help for GM are the Senators from the south, I would be interested how much money Senator Shelby has gotten from his close ties with foreign car manufacturers, big tax breaks to build the factories in Alabami, but why not, the whole government is on the take, why else would they throw 700 billion at the financial companies no questions asked or accountability required but send the auto makers packing empty handed, maybe we should look at all the benefits Senator Shelby gets at taxpayer expense.
(Quote)
December 7th, 2008 at 12:23 pm
hi JEC #15,
“… the banks won’t loan them the money? Well why not? Because they are to risky…”
___________________________
Wags was asked about this. He replied by saying that (selling) GM interests overseas would provide collateral for the loans.
I believe all remaining TARP/bailout money should be revoked and withheld. America can’t risk it’s future by continuing to print bad money over a prolonged period of time. I’m not willing to be pulled down on a bad bet.
A savvy investor will step in and buy the new GM E-REV technology. Maybe it will be Mr. Pickens. Look at Phoenix Electric Cars of Southern California for example. They have a very good looking EV pick-up truck and a small EV SUV. Their problem is that the battery packs weight 900 lbs each! They are managing to sell these vehicles to electric utility providers. How can a small company with outdated technology be leading the EV pack? Because they are the only ones providing an affordable EV with a 100 mph top speed.
Will I buy one? “No”, I’m not interested in a limited range truck with an outdated battery system.
++++++++++++
I also agree with the plan to tax the gas pump price up to a fixed $2.50 per gallon for 91 octane. And spending this surplus on hiring displaced auto workers to manufacture EV’s and E-REV’s. The current period of “cheap gasoline” will be short lived. Let’s not get caught with our pants down AGAIN.
Here’s a good look at the current Phoenix EV truck w/ 900 lb battery.
http://garfwod.250free.com/Photos/phoenix-ev.jpg
=D~
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December 7th, 2008 at 12:31 pm
Many Americans have already boycotted GM and Ford. That is one part of the reason they are where they are.
There is an irrational hatred of these companies by a segment of our society. Loans from the Govt. cannot fix this.
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December 7th, 2008 at 12:42 pm
Senator calls for Chrysler merger, new CEO at GM
12/07/08 1130 EST
Sen. Chris Dodd heads the Senate Banking Committee. He says he is hopeful Congress will pass a short-term $15 billion aid package for the automakers in the next several days. But the Connecticut Democrat says the companies should have to restructure if they want a more significant bailout from Congress next year.
Dodd says the companies need quick cash to avoid collapse in the next several weeks. But over the long-term, Dodd says Chrysler probably ought to merge with another company and General Motors should be required to replace chief executive Rick Wagoner.
_______________________
Ouch! Think it was something he said?
=D~
(Quote)
December 7th, 2008 at 12:45 pm
Jabroni Says:
“Have you all been reading about the new “Czar” role in all of this? I am not sure I like the idea of one person overseeing this loan.”
=========================
I would be all for this, as long as I am the one
(Quote)
December 7th, 2008 at 12:47 pm
I did the math on the old thread about how far GM lasts on a bridge payout of 8 billion (at the low end) to 14 billion (at the extremem high end) respectively.
Short answer was GM is in the same or worse panic/lobby mode by Jan 20th on 8 billion (4+4). 14 billion gets them to mid/end of march before we are back to this situation, but that leaves little left in the pot for Chrysler…but it is still a option to paying them less than they need, as Cerberus has deeper pockets and will likely pick up the slack if they think more is coming.
Posts 13 & 40 if your interested:
http://gm-volt.com/2008/12/06/automaker-loan-breakthrough-deal-at-hand/#comments
Long story short, if Obama wants time to actually work out a plan with his new playmates on Jan 20th, he should be looking north of the 8 billion that GM said they needed for sure by the end of Jan, otherwise we will see the same quagmire (or worse) than we have now.
Side note: I also think it is kind of ironic that this plan is near identical to the one that Voinovich (R-Ohio) proposed weeks ago…and it was dismissed out of hand by the Dems.
It is going to be a interesting read when it comes. Likely they will only get one crack at it, so it will probably have a couple weird items authored by individual Republicans to ensure the votes are there for passage.
(Quote)
December 7th, 2008 at 12:48 pm
Does Dodd give any justification for his statement the GM should rid itself of Wagoner?
I am not saying he is wrong, but I hope he provided concrete reasoning for making such a bold statement, not just Senator speak…
(Quote)
December 7th, 2008 at 12:50 pm
#21 Dave K said
Dodd says the companies need quick cash to avoid collapse in the next several weeks. But over the long-term, Dodd says Chrysler probably ought to merge with another company and General Motors should be required to replace chief executive Rick Wagoner.
____
Ouch! Think it was something he said?
=D~
=========================================
Sounds like a good plan to me.
(=
/tick tock
Here is the source link from AP, it doesn’t really say anything else. I don’t watch sunday morning TV, so I didn’t see Dodd’s comments on ‘Face the Nation’
Bloomberg expands a little more though (with a update):
http://www.bloomberg.com/apps/news?pid=20601087&sid=al3FJ0.QT5yI&refer=home
(Quote)
December 7th, 2008 at 12:57 pm
So, does anyone know yet, or is it to early, if the steep decline in gas prices is helping any of the big 2+contender?
Are SUV sales picking up at all? If so, how much impact will this have to GM’s bottom line?
If GM can slow down its cash burn rate, maybe they have a pulse into early 2009, and somehow turn the corner and get close to even. I would expect with all the cuts GM is making and if sales picked up, that they would actually be near a point of survival, but I am just interpolating the basic data, and the details escape me. Statik seems to have this figured, but can there be any optimism that the automakers can right the ship, or at least slow down the process?
(Quote)
December 7th, 2008 at 12:58 pm
#25 statik (me)
My link dropped when I edited, should read as follows:
—————————–
Here is the source link from AP, it doesn’t really say anything else. I don’t watch sunday morning TV, so I didn’t see Dodd’s comments on ‘Face the Nation’
http://biz.yahoo.com/ap/081207/congress_autos.html
Bloomberg expands a little more though (with a update):
http://www.bloomberg.com/apps/news?pid=20601087&sid=al3FJ0.QT5yI&refer=home
/sorry
(Quote)
December 7th, 2008 at 1:08 pm
#26 JEC
“So, does anyone know yet, or is it to early, if the steep decline in gas prices is helping any of the big 2+contender?
Are SUV sales picking up at all?”
I was wondering the same thing. However, since the cat is out of the bag on GM’s dire “situation”, no matter what, I would bet that December will be worse, and next quarter will be worser.
=D~~~~
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December 7th, 2008 at 1:09 pm
Until a crisis develops there usually can’t be any fundamental reform. The US steel industry had to be on its death bed, before it reformed, the old Bigsters ceded control to the mini-mills, and many obsolescent plants and approaches were abandoned.
Today the US steel industry is healthy, produces as much as steel of better quality, than it ever did, and uses recycled scrap steel for most of its raw materials. It is the envy of the World. The steel is made in modern electric furnaces from scrap sources, that third world steel mills can’t copy.
The US auto industry finally started to get serious in 2005 and 2007 in the Labor contracts with the UAW. By 2010 they will be at labor cost equality to the transplants. By 2010, their legacy costs will be equal to the others. Then they will finally be able to put the same quantity of features into their cars that the others do, for the same price, and still make a profit, that was impossible before. The Big Two will survive,absorb the remnants of Chrysler, and prosper, here in America. Just as they do all over the rest of the World.
If I would chose an automotive Czar to force the necessary re-structuring, we could do a lot worse than to chose Senator Corker from Tennessee as the automotive Czar. He is certainly a Star to arise from these hearings, praised by both Fellow Republicans and Democrats on the floor of the Senate and House.
I hope they listen to him, even in the Administration changing, mini bridge loan being currently negotiated.
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December 7th, 2008 at 1:20 pm
statik,
I read your posts with a high level of interest from the past couple of articles about the impact of the loans on GM’s cash position based on their submited “plans.”
- I think you are right that their “downside” projections of 10.5 million units @ 22% market share starting in Jan and Feb would actually be miraculous performance. I can easily image them with 20% market share in 10 M unit January.
- As for their projections of neutral cash flow after Q1 2009, how much of this do you attribute to money coming out of the section 165 funds? All of the automakers had significant amount of money spent on new product in their turn around plan, so if they get additional funds, even if it is limited to “tooling” this could allow them to shift other money around to meet operating needs. It seems that if this is the case, then their predictions are more dire than they seem – neutral cash position after section 165 loan dispersal at inflated market share – even in the downside scenarios.
- Will there still be TARP funds available after Q1 2009 that Obama could distribute without going through this dance again, or will we have to repeat this – again – early next year? I was under the impression that about half of the money had already been distributed. Is there a time limit for the treasury to disburse these funds?
-Prosser
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December 7th, 2008 at 1:27 pm
The criteria for what business get bail outs.
Quite simple, first would the fall of that company put several hundred thousand or possibly millions of peaple out of work.
Second would it take investors with hundreds of billions of dollars to buy the companys, hire new workers, get the playing field leveled to be able to compete with the rest of the world.
Third would the loss of said business have a major effect on our self defense industry.
Forth would losing said business give foreign companys an advantage in market penatration that would take years to over come.
Last would the loss of said companys drastically reduce the taxes collected by the gov. and would the cost of covering the unemployement benifits and the now nonexistent pension cost be to great to bear.
(Quote)
December 7th, 2008 at 1:35 pm
#26 JEC
So, does anyone know yet, or is it to early, if the steep decline in gas prices is helping any of the big 2+contender?
Are SUV sales picking up at all? If so, how much impact will this have to GM’s bottom line?
If GM can slow down its cash burn rate, maybe they have a pulse into early 2009, and somehow turn the corner and get close to even. I would expect with all the cuts GM is making and if sales picked up, that they would actually be near a point of survival, but I am just interpolating the basic data, and the details escape me. Statik seems to have this figured, but can there be any optimism that the automakers can right the ship, or at least slow down the process?
———————————————————-
I can actually take this one if you like.
Yes…and No. I don’t have specific data nationally (as there is no weekly vehicle to monitor sales), but regionally here in Ontario there is evidence of a uptrend in SUV sales.
Reuters talked to several dealers on Wednesday, they said they were seeing a slowdown in smaller car euphoria, rising prices for used SUVs and an uptick in sales.
I’ll c&p a quote or two for you:
“The overall economic climate is challenging, but I have seen an up-tick in SUV sales” in recent months, said Scott Gruwell, the manager of Courtesy Chevrolet in Phoenix.
Jim Pulskamp, sales manager at Jake Sweeney Chevrolet in Cincinnati, said sales have definitely swung back to trucks as the cost of gasoline has declined and manufacturers offer huge end-of-the-year rebates on 2008 model trucks.
—-
That second quote goes to my ‘yes and no’. Yes, there is a slight rebound with gas prices so cheap, but no on the optimism that this will ‘right the ship’
The problem is that the slight rebound/relief is being felt at the dealership level. Most dealers have 180-360 days inventory of large SUVs, meaning it is being deep discounted, sold…then not replenished/reordered, which is how GM makes its money.
(Quote)
December 7th, 2008 at 1:38 pm
To give you a example of how bad the dealer reorders are, GM on Nov 21st (thru Jan 5th) has made a unbelievable (& convoluted) system to require/blackmail dealers who are attempting to lower there inventories to order a specific number of new cars to get incentives on their existing 2008/2009 models, specific rebates offered to vehicles on lots:
Traverse $3,000
Tahoe and Suburban SUVs $3,000
Impala $3,000
Cobalt/G5/Pursuit $2,000
Basically it goes like this Dealer A is selling his tail off and has reduces his inventory to match his ‘days on lot’ estimate, while Dealer B is still holding his traditional inventory, although his ‘days on lot’ has increased dramatically the past few months.
GM says to Dealer A, you have to buy XX number of vehicles to realign your inventory levels (even though common sense says to not do that) or Dealer B down the road is going to be able to sell his cars/SUVs for $2,000-$3,000 less than you. The are basically making dealers put guns to each others heads.
The name of the evilest and most ill-conceived ‘incentive’ program of all-time?
“The Re-Consensus Dealer Cash Program”
If anything rebounds December sales slightly it will be this. The truly evil part of all this is that yes, they give rebates where they are most needed, on big SUVs/Traverses and they are forcing inventory levels, but without adding the ‘Cobalt/G5′ to the mix, they would not care.
That $2,000 off Cobalts/G5s is a big number (dreams of dollar bills in their heads for those who qualify/order and a knife in the back for those who aren’t close to qualifying…or can’t because they have no credit). It is flat out forced manipulation of dealers, causing them to mortally wound themselves for the short term good of the corporate parent.
The problem for GM after this is (and if they get bailed out) is, how do they turn off the rebate tap?
If they stop giving the rebates on new cars, they are left with two types of dealers. The ones that are close to being broke, the wounded the dealers who took appropriate actions for sustainablilty who have no working capital to buy more stock because there sales are gone. And the ones that did get the rebates…who were already grossly over-inventoried, that are now SUPER grossly overinventoried. They propbably don’t want to order at all for 6 months because of what this program did to them…made them increase inventory levels when they should have been streamlining.
http://www.autonews.com/apps/pbcs.dll/article?AID=/20081201/ANA06/812010349/1197
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December 7th, 2008 at 2:18 pm
JEC @ everywhere:
These are supposed to be LOANS…and no banks are lending money right now–especially to high risk corporations (like GM and Chrysler).
Next, I’ll bet we see a merger of GM and Chrysler…why everyone is saying let them die I am not sure. They previewed multiple EVs (which I agree have a LONG WAY to go to be production ready), but I want an EV! So the more the merrier.
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December 7th, 2008 at 2:19 pm
#26 JEC – “So, does anyone know yet, or is it to early, if the steep decline in gas prices is helping any of the big 2+contender?”
Man, you really don’t understand the problem. The problem is with the financial system. Cars are big ticket items and consumers need credit to buy them. Consumer credit is not available because the financial system is broken. So of course the price of gas is not greatly affecting sales — if you can’t get an auto loan then what difference does it make what gas prices are?
#15 JEC – “In the US we have survived by allowing the weak companies to fall (at least we used to) and the strong companies survive.”
This is the corollary to your fundamental misunderstanding of the problem. The isn’t a case of a poor company failing or even a case of a business cycle replacement of one industry with another. It’s a case of a financial failure taking down broad swaths of the economy. US automakers have been hit first because the financial meltdown hit the US first. The financial meltdown is spreading globally. Wait a few months and every car manufacturer in every part of the world will be on the verge of bankruptcy.
#15 JEC – “Other countries can chose to do what they believe is the correct thing to help out its own.”
This makes the same amount of sense as arguing that unilateral disarmament is a good idea. What you’re basically arguing is that we should get rid of all of our weapons even if our opponents are arming to the teeth. Doesn’t seem like much of a recipe for anything but self-inflicted destruction.
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December 7th, 2008 at 2:23 pm
Oh joy! MORE public debt!!!! WE’RE SAVED.
Keynesian economics, Congress and the corporate media have it all backwards.
It’s NOT the lack of credit that is killing the American economy. It’s the fact that we have TOO MUCH DEBT!
We have been borrowing from EVERYONE in order to buy their foreign crap, pay for an endless welfare state and finance a global empire we simply can’t afford. This SAME thing has happened to EVERY empire including since the Babylonians. Empires (Greek, Roman, Spanish, British, Soviets) ALWAYS collapsed of their greed and debt.
MORE debt won’t get us out of debt. Only a complete MORON would believe that it’s a good idea to borrow on a NEW credit card to pay off an old one while still trying to buy MORE crap will keep the economy a float. WRONG!
Some morons here even blame the Centrally Planned “Free” economy when it’s so simple any CHILD could see it…
MORE borrowing or MORE fiat currency will only make the hole DEEPER and the depression HARDER and LONGER.
We MUST STOP importing so much CRAP and that means LOWERING our standard of living and living within our means until we can compete and become an EXPORTER again so that we can EARN enough to PAY OUR DEBTS.
This is going to hurt and CONGRESS is making it WORSE by debasing our fiat currency.
Do YOU pay your debts? Good! So must Congress and NOT by printing more fiat/debt currency.
We played. We had fun. The roaring late 90s – early 2000s were just like the roaring 20s. The party is OVER. Now we must clean up the mess and pay the bill.
Congress wants MORE alcohol! They (AND YOU) are all DRUNK on unlimited fiat currency.
But don’t worry. The empire WILL end and we will be FORCED to live within our means ONE WAY OR THE OTHER.
Will our Representative Republic and Bill of Rights survive?
I hope so (for our children’s children)
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December 7th, 2008 at 2:28 pm
Here’s Obama’s views on the auto industry bailout, as expressed in an interview today. Basically, like his stimulus plan, it’s a blueprint from the American Center for Economic Progress. It’s importance is that this “tough love” approach will be the plan going forward:
“They’re going to have to restructure, and all their stakeholders are going to have to restructure—labor, management, shareholders, creditors—everybody is going to recognize that they have—they do not have a sustainable business model right now,” Obama said. “And if they expect taxpayers to help in that adjustment process, then they can’t keep on putting off the kinds of changes that they frankly should have made 20 or 30 years ago. If they want to survive, then they better start building a fuel-efficient car. And if they want to survive, they’ve got to recognize that the auto market is not going to be as large as some of their rosy scenarios that they put forward over the last several years.”
It’s actually quite a good approach and one which should satisfy everyone but the most extreme. It’s also workable and non-ideological, which is refreshing.
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December 7th, 2008 at 2:37 pm
Chrysler doesn’t deserve this, they only build gas guzzlers. No real mystery why they are going bankrupt/
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December 7th, 2008 at 3:00 pm
#35 Tim… right on.
The future for any car company is the 5-10 year continuation of selling gas/diesel car as the primary vehicle. It all goes back the average person not being able to buy more expensive Hybrids that won’t see a quick payoff on the extra fuel savings investment. Also, as Lutz has said, the Volt is a money loser for probably the entire life of version1 (4-5 years).
Speaking of our give money away happy government, did all of us know that the very regulations the Fed and California have in place keep the high mileage cars sold elsewhere around the world out of the US? Amazing to think we like to blame people for wanting ‘gas guzzlers’ but forget to notice our on government won’t allow better mileage cars in because of out of control regulations.
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December 7th, 2008 at 4:00 pm
WOW! That’s a nice picture of the Capitol Building.
NPNS!
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December 7th, 2008 at 4:10 pm
Since part of the funding is to come from the previously earmarked retooling funds set aside for Plug-In Hybrids & the like, I sincerely hope that this will not be a prelude or an effort on the part of GM to say that the funds that would have otherwise been used to bring the Volt to market are now to be used to basically save GM from non-existence & thus the Volt must be shelved until such time as GM is back in the black.
Message to Bob Lutz & Rick Wagoner: Don’t do it guys, don’t let them kill the Volt.
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December 7th, 2008 at 4:30 pm
The articles on this website are appealing but 90% of the comments on them are absolutely ridiculous. You people know nothing about macro economics, the auto industry or most anything else.
I recommend that we close down these comments and move them to the forums.
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December 7th, 2008 at 4:40 pm
Now THIS is a great thread topic:
Straight from the GM facts and fiction site, it has a link to tomorrows Ad in the Automotive news (which conflicts some past ‘facts’)
—-
GM’S COMMITMENT TO THE AMERICAN PEOPLE
We deeply appreciate the Congress considering General Motors’ request to borrow up to $18 billion from the United States. We want to be sure the American people know why we need it, what we’ll do with it and how it will make GM viable for the long term.
While we’re still the U.S. sales leader, we acknowledge we have disappointed you. At times we violated your trust by letting our quality fall below industry standards and our designs become lackluster. We have proliferated our brands and dealer network to the point where we lost adequate focus on our core U.S. market. We also biased our product mix toward pick-up trucks and SUVs. And, we made commitments to compensation plans that have proven to be unsustainable in today’s globally competitive industry. We
have paid dearly for these decisions, learned from them and are working hard to correct them by restructuring our U.S. business to be viable for the long term.
…We are in the midst of the worst economic crisis since the Great
Depression. Just like you, we have been severely impacted by events outside our control.U.S. auto industry sales have fallen to their lowest per capita rate in half a century. Despite moving quickly to reduce our planned spending by over $20 billion, GM finds
itself precariously and frighteningly close to running out of cash.
This is why we need to borrow money from U.S. taxpayers. If we run out of cash, we will be unable to pay our bills, sustain our operations and invest in advanced technology.
—
…it goes on from there, read it all yourself here:
http://gmfactsandfiction.com/wp-content/uploads/2008/12/congress-an-final-120408.pdf
Root source:
http://gmfactsandfiction.com/
Finally, honest straight talk…at the 11th hour…or 11:59:59. I can tell you Wagoner did NOT right this. It is so foreign sounding you’d swear it wasn’t real, lol. (Although they continue to put forward the notion of their viability/future profitability and some crazy talk about starting to repay the America taxpayer in 2011)
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December 7th, 2008 at 4:45 pm
The reason they say get rid of Richard Wagoner is he has been around too long not helping GM. The jerk with Chrysler was fired from Home Depot in 2007 for doing nothing and received a 210 million dollar Golden Parachute. Ford is not as bad off as the first two, so they can hang on. An earlier post said Chrysler people are against GM and Ford, Does this mean if you buy one brand you are against the other two? I thought this was called freedom of choice!!!!
Also I find it interesting how one group is so against the banks, who finances most of the cars sold and the other group that wants the banks to help bail out the Big 3. No win situation!!!
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December 7th, 2008 at 4:46 pm
#42 Bintoo
Want to know what I recommend?
I recommend that you respect peoples right to freedom of expression & speech.
Does’nt matter how ridiculous these comments are, because they’re just that, COMMENTS.
You’re the one thats ridiculous.
You don’t like peoples comments?
Well then, instead of advocating these comments be moved to the forums, I recommend you remove yourself.
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December 7th, 2008 at 4:47 pm
Do you really think the oil companies want high milage cars? Who do you think the present administration works for? Certainly not the American people.
The only reason that a privatly held company (Chrysler) is in this game is the Cerberus lobbiests. They stand to lose at least two billion unless Chrysler can be taken off their hands (merger).
The theory behind the stimulus is that if we can keep people employed and spending money our taxes will be higher. This theory is supported by the latest Nobel winning economist, Paul Krugman. His concern is that we can’t get the stimulus into the economy fast enough, especially while we have a transition of power taking place. He doesn’t think the infrastructure work program will be quick and big enough. In his last blog he chacterized the economy as being in free fall. Oh yeah, he predicted this mess a couple of years ago. No one was listening, they were having too much fun partying.
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December 7th, 2008 at 5:44 pm
Stantheman Says:
I would rather buy a foreign owned brand produced in America like Toyota or Honda. If you buy a GM after a baliout you are really paying twice for the car – once with taxes, once more at the dealer.
————————
[sigh]….
OK, once again … Toyotas and Hondas are not “produced in America”. They are assembled here. Assembly is maybe 10% of “produce”. The other 90% happens in Japan, and that’s also where most of the profit goes.
This is not about GM vs Toyota … this is about USA vs Japan. You are on the side of Japan. Although I find that offensive, I’m sure the Japanese government appreciates your dedication, since it helps their ultimate goal of owning the United States.
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December 7th, 2008 at 5:45 pm
This is GREAT! Finally the government is supporting an industry that is making products that will get us off fossil fuels. Obviously the reluctance of Congress to invest in the alternative energy future is the pressure they get from petroleum lobbies.
Thank goodness they have come to their senses and are now getting behind the new American auto industry. Good work all around.
GO VOLT! npns
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December 7th, 2008 at 5:45 pm
hi statik #43,
“At times we violated your trust by letting our quality fall below industry standards and our designs become lackluster.”
_______________________________
If this were the first dance of the night I would give this statement more weight. It should read:
At times we violated your trust by not being honest with ourselves and with the public. We misrepresented our model line and missed projected release dates. We fell into a rut of burning more than a billion dollars a month. Give us another try, we have reformed.
_______________________________
If President Elect Obama wants to keep his wish of making the Big 3 (and auto jobs) survive “a priority” he had better show up at this dance soon. I suggest an efficiency rebate on cars (not a tax credit). And I expect a soaring speech on preserving the Big 3.
The man on the street doesn’t have the cash to pay full price and then wait for a tax credit. The other obstacle to buying American is having a support system for vehicles in the future. We need to get beyond this “just trust me” stage.
=D~
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December 7th, 2008 at 6:30 pm
I hope the Big 3, the Union, the Congress, President Elect Obama, and the American People can come to a concensus on a do-able plan. My family is going into ‘Christmas” mode now. We will be decorating the tree, sending cards, and sharing hugs. Good luck to all involved in the auto maker bailout program.
Our currency (2015)?
http://garfwod.250free.com/Photos/100milnote.jpg
I don’t want to die!.
http://garfwod.250free.com/Photos/prayformercy.jpg
=D~
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December 7th, 2008 at 6:34 pm
Bridge loan would bring them (GM & Chrysler) just enough cash to survive until february/march. Then, a deeper analysis & larger debate should occurred to find a realistic consensus to focus on a medium/long term plan for the 3 (or 2).
Chevy, Saturn, Cadillac & GMC truck would be a more simplified marketing structure for GM in my eyes, ever if they are forced to merge with Chrysler. Saab should be limit to the European market (Opel or sold). Buick is a popular brand in China(!), if profitable keep it as is, no idea about Dawoe future plan as well, some joint venture with Toyota (NUMI) and Suzuki (GM sold their shares lately) . Pontiac will vanished in the wind and Hummer to whoever ready to pay for…
May Chrysler become an assembly line sub-contractor and components mfg only, to be used by other manufacturers? Time will say…
Only my 2 cents opinion
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December 7th, 2008 at 7:16 pm
My Fellow Americans,
In this time of crisis every American should to step up to the plate and support American Corporations and American Made Products-Specifically from the 3 American Car Companies.
The Government and consumers of Japan and Germany supports theirs.
Their are too many turncoat Americans who don’t believe in themselves or their country and perceive there is more value in foreign products.
Guess what you can buy a better car for the money made right here by an GM Ford or Chrysler with better warranties.
SO FOR AT LEAST THIS ONE TIME FOR THOSE OF YOU who are going out to buy a Foreign Brand because your perception is NOT the reality STEP up to the Plate and BUY AMERICAN.
Try to be proud AMERICAN and to be more Nationalistic at least for the next 6-months.
HELP our Economy not Japans,China’s,etc
If you are in the market for a new car please consider, test drive and then buy one from GM,FORD or CHRYSLER.
Transplant owners-You know who you are-Ditch that over valued Camry or Accord and get a Malibu-A better car for the money,with better gas mileage and a better warranty!
Thanks and good night
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December 7th, 2008 at 7:22 pm
#37 DonC,
#38 joe obrien ,
Two things are clear to me:
1) Chrysler and GM want to merge, but GM doesn’t have the cash to make this happen.
2) Obama wants to restructure the U.S. auto industry, and Congress seems to agree.
So maybe the best scenario is that that the U.S. government facilitates a merger of GM and Chrysler along with a massive restructuring of the combined company.
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December 7th, 2008 at 7:29 pm
#35 DONC
I think we are on different thought patterns. I’ll try to respond to each of your arguments…
#26 JEC – “So, does anyone know yet, or is it to early, if the steep decline in gas prices is helping any of the big 2+contender?”
Man, you really don’t understand the problem. The problem is with the financial system. Cars are big ticket items and consumers need credit to buy them. Consumer credit is not available because the financial system is broken. So of course the price of gas is not greatly affecting sales — if you can’t get an auto loan then what difference does it make what gas prices are?
====================
I admit to not being a financial wizard, but not all people are having a problem getting credit or paying cash (I have payed cash for every car since 1996). I was not saying things were rosy, but my question was if sales might pickup for some of the SUV’s based on the fact that gas is now cheaper.
#15 JEC – “In the US we have survived by allowing the weak companies to fall (at least we used to) and the strong companies survive.”
This is the corollary to your fundamental misunderstanding of the problem. The isn’t a case of a poor company failing or even a case of a business cycle replacement of one industry with another. It’s a case of a financial failure taking down broad swaths of the economy. US automakers have been hit first because the financial meltdown hit the US first. The financial meltdown is spreading globally. Wait a few months and every car manufacturer in every part of the world will be on the verge of bankruptcy.
===================================
So, where are you going with this argument? So, we should give money away to any company who needs it? Or, just to ones you believe are deserving?
#15 JEC – “Other countries can chose to do what they believe is the correct thing to help out its own.”
This makes the same amount of sense as arguing that unilateral disarmament is a good idea. What you’re basically arguing is that we should get rid of all of our weapons even if our opponents are arming to the teeth. Doesn’t seem like much of a recipe for anything but self-inflicted destruction.
==================================
We talking cars, not defense. I am talking about OUR economy and how we live in a capitalistic country. So are you saying we should have our govt give OUR money to companies that are having difficulties? What are the requirements for a company to be bailed out?
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December 7th, 2008 at 8:15 pm
RE: If U Fly the American Flag
I’ll be happy to buy an American made car, if they solve their own problems by declaring bankruptcy and reorganizing their companies to become profitable. If they don’t do that, I’m not giving them my tax money AND my money for a new car. They can take their pick, one or the other but not both. I support free enterprise, and that my friend is the most American thing there is.
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December 7th, 2008 at 8:25 pm
More people are backing the ‘oust Wagoner’ mantra. We all know about Dodd earlier, so I won’t get into that.
Obama hinted at change this afternoon, “If this management team that’s currently in place doesn’t understand the urgency of the situation and is not willing to make the tough choices and adapt to these new circumstances, then they should go”
Sen. Charles Schumer (D., N.Y.), today from his office said that, “while it can’t happen tomorrow because of the urgency of the companies’ financial situation, I would like to see management changes as part of any restructuring.”
Jerome B. York, an adviser to billionaire investor Kirk Kerkorian who served as a GM director in 2006 when Mr. Kerkorian owned a stake in the company, said today, “Aside from a failure of leadership at the most senior executive management level, GM has five long-serving directors who have been on the board 10 years or more,” Mr. York said in a telephone interview. “They have approved of and overseen many of the moves that have contributed to the company’s troubles. They should also resign.”
————————–
GM actually responded to the new wave of high profile figures calling for management change (well, at least Dodd):
“While we appreciate Senator Dodd’s efforts on behalf of the U.S. auto industry, the employees of General Motors, its dealers, its suppliers and its Board of Directors all support Rick Wagoner and are confident he is the person to lead GM through these difficult times,” GM spokesman Steve Harris said in a statement.
But of course, what the heck is he going to say? “Yes, we agree Wagoner should go.” Doubt it.
I’ve been dying for Fritz to take out Wagoner for months…he clearly is the right guy, he has the smarts and pedigree for it. It looks almost assured he is going to get the chance as soon as/if the government pulls through with big bailout bucks in Jan/Feb.
Source articles:
http://www.detnews.com/apps/pbcs.dll/article?AID=/20081207/AUTO01/812070330/&imw=Y
http://online.wsj.com/article/SB122869243877986475.html?mod=yahoo_hs&ru=yahoo
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December 7th, 2008 at 8:40 pm
I normally shop for a new car in late December, however, I bet if I wait until late March that I can get a killer deal on one of the new 2008’s that are backing up on the lots.
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December 7th, 2008 at 8:56 pm
#55 Stan the man
LOL…
You support free enterprise by buying cars from the Japanese who religiously prop up their industries when they need it, and harbor anti-competitve importing laws so non-japanese auto companies can’t crack the market.
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December 7th, 2008 at 9:26 pm
No one can get a loan for anything at this time because the banks are sitting on the money, they are even afraid to loan money to each other. Senator Dodd where are you going to find a replacement for Rick Wagoner he is willing to work for a buck a year. WOW NOW HERE IS AN IDEA HOW ABOUT THE CONGRESS WORKING FOR A BUCK A YEAR UNTIL THE DEFICIT IS PAID OFF, THEY HELPED GET US IN THIS MESS THE COUNTRY IS ON THE BRINK OF COLLAPSE NOT JUST GM.
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December 7th, 2008 at 9:41 pm
This is my first and last response, because for a website dedicated to a product, there are many people eager to kill this product. Shouldn’t the discussion be centered around getting this product on the road?
I have questions:
1.If Nissan, Toyota, or Honda went to the Japanese government for loans, would they be forced to go through all of this crap? If the crappy economy and credit crunch go on for much longer, they will also face insolvency. However, the Japanese government will do it much like the US Government did it with banks in this country, by keeping it the names of the company anonymous. That way the wool will remain over our eyes.
2.If we loss all of our domestic car companies, what will keep the Japanese automobile companies from building cars in this country? They came here to prevent the possibilities of the quotas from the 1980’s. Without a domestic car industry, the threat of a quota is gone.
3.Is Mexico a world-class economy? They have many automobile plants; they export much of the product outside of their borders, sounds like a recipe for success? Well, this is model that people are proposing for the United States. As long as the car is assembled in the United States, then it is good for the economy? This economy needs to have the domestic car companies, so the wealth from the assembly plants remains within the country.
4.Do we sit on our principles of a free economy, even if foreign government targets our manufacturing base by subsidizes their industry? What is the purpose of METI? If you believe the government should not get involved, then all manufactures in the United States is doomed to fail. Our economy is big, but it is small compared to the combined economy of the rest of the world. If our industry targeted, there is enough weath outside our borders to kill it, no matter how well the company is run.
Do not believe that this country has a free economy. How come the Federal Reserve and the Treasury can give money to private financial companies? The government controls the money supply; they also impact the economy with their policies. The economy problems did not start with the automobile industry, but they are taking the brunt of it.
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December 7th, 2008 at 9:48 pm
#35 DonC
#26 JEC – “So, does anyone know yet, or is it to early, if the steep decline in gas prices is helping any of the big 2+contender?”
—-
Man, you really don’t understand the problem. The problem is with the financial system. Cars are big ticket items and consumers need credit to buy them. Consumer credit is not available because the financial system is broken. So of course the price of gas is not greatly affecting sales — if you can’t get an auto loan then what difference does it make what gas prices are?
==========================================
I’m not going to disagree with you Don about the system being broken, but I’m still not sure if it is completely.
I think what we are seeing is a massive overcompensation. From almost anyone with a pulse getting as much credit as they want at good rates to only the top 10-15% having such access.
I see it splintered as follows
Low wage/FICO under 600(lowest 15%):
Old Economy: Limited access + poor rates
New Economy: No access + loss of existing credit lines
Low wage/FICO 600-700 (17 to 42% bracket of population)
Old Economy : Decent access + Good rates
New Economy: No access + credit line contraction/pressure
Med wage/FICO 700-750 (43 to 60% bracket of population)
Old Economy: Open access+ Good rates
New Economy: Very limited access + premium (bad) rates
Med wage/FICO 750-800 (61 to 87% of population)
Old Economy: Open and over access + Great rates
New Economy: Strained access + Poor rates
Med/High wage/FIC0 800-825 (88-95% of population)
Old Economy: Anything you want + Discount rates
New Economy: Good Access + Decent Rates
High wage/FICO 825-850 (96-100% bracket of population)
Old Economy: You could buy Spain at discount rates
New Economy: Easy Access + Super Fantastic Rates
===========================
I don’t have any specific survey to point to this as hard facts because…well, there is no such thing obviously and lenders lend basically anyway they choose. ie) some regional banks have far easy standards than their national counterparts
Personally, I don’t borrow money, I’m not looking to borrow money, I like to pay cash…but I am now looking at unbelievably great rates on open lines and super discount rates on my margin trading accounts. I think that is the plague that is emerging, a unbalanced two tier system with no middle ground. Have and havenots.
It has gone from 85% of the population having credit, and mostly at pretty good rates, that were pretty close to what the top 10-15% were getting (and they were acting like they were entitled to it).
Now that has changed big time and very, very quickly. That 85% is all but cut off, and if they do get credit, the spreads are huge. Middle class America is learning you don’t get to own a $400,000 house and drive a $40,000 Tahoe on credit and only make $60,000.
For the top 15%, more specifically the top 5% it is bizarro stupid great. With the gov’t doing everything they can to get money flowing back to the ‘average’ person (and not succeeding very well yet) the money pool/rate to those high wage earners with high FICO, money in the bank and virtually no debt is asinine. They have established, large revolving credit vehicles that keep getting better. I have a couple unsecured lines of credit that are pegged at 1/2 pt under prime…in this environment everytime I check it the rate is lower. I’m not buying anything…but there it is (I guess that is the problem too).
The divide seems to be widening every month. I have friends that just got a mortgage, they HAD to put 20% down (which they didn’t have, so they got it from a credit card) and then they are paying 6.5%, which I find crazy, because I look at my open LoC and see a rate of 3.5%.
The Bank of Canada is going to cut the rate by either 50 or 75 points this Friday, so I will be seeing anywhere from 2.75-3% rate by next weekend.
Here is a handy graph of the Prime Rate vs Mortgage rate disconnect, through November in Canada to illustrate my point…it will look much worse next week:
http://www.primerate.ca/graphs/20075yrprimerates.png
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December 7th, 2008 at 9:50 pm
How is my math? We are talking about $10,000 borrowed per vehicle sold? Yikes!
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December 7th, 2008 at 10:08 pm
#61 Statik
Not only don’t I disagree with your analysis, it has the numbers I didn’t. A few points:
1. To me, if 85% of consumers can’t get a car loan then the financing system is broken because for practical purposes the market is gone. If you want to say it’s not completely broken that’s fine. Realistically there are still banks and they are making some loans. No argument there.
2. Thanks for the numbers. Nice find. Where did you get them from? I looked but came up empty. Your numbers surprise me a bit because my reaction is that they overstate the percentage of people with FICO scores over 700.
3. FICO scores are not the end of the story. I know a woman who brokers both auto and home loans and she’s saying her lenders are getting very picky about income. So people like you with high scores and “artificially” low stated income aren’t getting very good rates.
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December 7th, 2008 at 10:12 pm
#60 Ron Hall
Great post with great points! Please don’t stop contributing.
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December 7th, 2008 at 10:46 pm
You know I just do not understand what is going on. Now I live in So IL so I am not in the high flyer set. A town of 50,000 is a hundred miles away. Two of our local banks have it up on their signs that they have money for loans. Went into my banker to ask how they were doing. He said they were doing ok—-a little slow but fine. Went to my local Chevy dealer who I have known for 40 years. I ask him how things were going? He said times were tough but he has seen worse. Nobody in this part of the world seems to think the world is about to end. Is this just a Coastal problem? Yes 70% of the people in the US live within 100 miles of an ocean but have we become so seperated? The hinder lands do not seem to be doing so bad.
Take Care
Arch
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December 7th, 2008 at 11:16 pm
If they are building the Volt using my tax dollars, can I get mine pre-approved with zero down and zero percent interest? In addition, since I didn’t buy my house with a sub-prime loan, and the banks got bailed out with my money too, I would like my credit score to be increased by at least 100 points. Would somebody get Congress to get the ball rolling on that? Thanks.
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December 7th, 2008 at 11:25 pm
—
I really wanted a Volt, but I agree a boycott is the way to go if they get bailed out by our taxpayer money
—
I hope you are boycotting the entire financial industry too.
I think, failure of the big 3 is now the difference between a deep recession and Depression. BTW, the amount of money tax payers will lose by not bailing out the big 3 will be substatially more than the bailout amount.
The real question is – even with the bailout can the auto industry survive ? Paul Kugman thinks, it won’t.
http://www.huffingtonpost.com/2008/12/07/krugman-us-auto-industry_n_149082.html
—–
Nobel economics prize winner Paul Krugman said Sunday that the beleaguered U.S. auto industry will likely disappear.
“It will do so because of the geographical forces that me and my colleagues have discussed,” the Princeton University professor and New York Times columnist told reporters in Stockholm. “It is no longer sustained by the current economy.”
—–
As Jay Leno keeps saying, the economy is not looking good.
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December 7th, 2008 at 11:33 pm
When we get our next car, I’ll be getting a loan, and I’m putting THAT off for as long as possible… If I can even get a loan. When I got our current two cars (one as a new car, one used) I paid cash. At the time we had no mortgage or children, and we were saving up to buy a house and after five years of losing bidding wars (We lost one bid by over $100,000!!!) continuing to save up for a down payment looked a lot like a lost cause.
We figured we’d give up the house hunt and keep renting, and I ordered a Mini Cooper – at the time they were so popular (maybe they still are) you couldn’t walk onto a lot and buy one, there was a three- to six-month waiting list, so you had to put your deposit down and wait.
The car finally arrived. The sales guy brought up the subject of financing and I pulled out my checkbook and said, “Oh, I’m not getting a loan, I don’t have a job.” (I just got laid off a week or two before.)
The look on his face? Priceless.
(Fast forward to today: We have a mortgage and my wife stopped working to be a stay-at-home mom to two terrific kidlets. I don’t have nearly the cash or cashflow to get a car even with a loan, not even a used one… but I wouldn’t trade this life for the old DINK* life. Toys don’t come close to the awesomeness of kids.)
(* Dual Income, No Kids)
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December 7th, 2008 at 11:39 pm
61 Statik:
Absolutely. That is the disconnect, they have overcompensated by a huge margin. I use a credit card because it is easy to use and pay it off every month…just got my credit line increased and a platinum card in the mail. I suppose wealthy small business owners are making out okay due to low interest and high lines of unsecured credit…as long as your business is in a decent market.
I watched the local real estate show this morning and was stunned by how far we have yet to go. People are still putting their houses out there at crazy high prices because they don’t want to go underwater. This thing isn’t going to be over until an equilibrium on housing prices and credit worthiness is re-established.
65 Arch:
I live in hinterland too and I guess it depends on the hinterland. NY Times pinpointed the county I grew up in, live, and work as “The White Hot Center of the Credit Crisis” I think at this point we are up to 15% unemployment. Rural Indiana…Elkhart County in case you wish to look it up. What is crazy is this has been the area of so much innovation. Factories and trained workers all over the place (Statik, if you wished to invest in a solar mfg or turbine mfg plant this area could have you up and running in 6-12 months…and I am not kidding) TVs in vehicles? Elkhart Indiana and the SVM industry. Cupholders in cars? Conversion van manufacturers Elkhart, IN. (GM engineers like to take credit for a lot of this crap but we have photographs and proof =)
Unfortunately all the products produced here require credit to purchase and dealers to have floorplan. All that is gone, although some dealers are starting to fight back by suing their financial institutions for breach of lending contracts. The industry grew too big for the volume and now is in the midst of a severe contraction.
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December 7th, 2008 at 11:42 pm
Some would agree, others disagree. Imagine driving down a street and every brand of auto is overseas. Where is the North American destiny at that point.
The Chevy Volt is likely to fail if gas stays at $40 a barrel. OPEC knows how to maintain our addiction. When a country, such as most in the Middle-East, can pump a barrel for just under $3.00, they control the price and addiction to oil. When they raise the price too high, milk us for awhile until fostered industries arise, and WHAM, down goes the price of oil until that wave of innovation sours and can’t restart too easily. Frankly, it’s time to baseline a barrel of oil – assure all the money goes to alternatives, such as the green car, so the government isn’t hooked to oil revenue either as happened in Europe. At $5 -$10 a gallon in Europe due to taxes, if their governments weren’t collecting those revenues, motorists and industry would have left Oil long ago.
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December 7th, 2008 at 11:45 pm
#63 Don C
#61 Statik
Not only don’t I disagree with your analysis, it has the numbers I didn’t. A few points:
1. To me, if 85% of consumers can’t get a car loan then the financing system is broken because for practical purposes the market is gone. If you want to say it’s not completely broken that’s fine. Realistically there are still banks and they are making some loans. No argument there.
2. Thanks for the numbers. Nice find. Where did you get them from? I looked but came up empty. Your numbers surprise me a bit because my reaction is that they overstate the percentage of people with FICO scores over 700.
3. FICO scores are not the end of the story. I know a woman who brokers both auto and home loans and she’s saying her lenders are getting very picky about income. So people like you with high scores and “artificially” low stated income aren’t getting very good rates.
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I think we are on same side of coin. I’m still of the opinion it is more in the ‘over compensation’ camp than the ‘broken’ and you are probably more in the ‘broken camp’…but same difference really.
Not sure what you meant by, “I know a woman who brokers both auto and home loans and she’s saying her lenders are getting very picky about income. So people like you with high scores and “artificially” low stated income aren’t getting very good rates”
I’m assuming you are using ‘me’ as in the broader sense. Your right to assume my ‘empolyment income’ is lower because I run my own business, but my income/wealth is generated from capital gains/investment income (which is triggered randomly year over year depending on how I shuffle my portfolio).
I don’t know how I would be viewed in a traditional broker/lender situation, so you could be right there. I would use the same source that carries my investments and gives me my LoCs to borrow from (if I was going to). I don’t think they would care if my stated income for a year was zero…the amount I would borrow would likely be many times less than my liquid assets.
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DonC said, ” Thanks for the numbers. Nice find. Where did you get them from? I looked but came up empty. Your numbers surprise me a bit because my reaction is that they overstate the percentage of people with FICO scores over 700″
I pulled them from myfico DOT com and transunion (you can get them by going there…although REALLY slow to come up). This site flags the link as spam, so I can’t give you the jump…I actually had to write this monster post twice, lol.
Here is the breakdown (forgive the C&P):
Percent SCORE DELINQUENCY RATE
2nd …… 300-499… 87%
7th …… 500-549… 71%
15th…… 550-599… 51%
27th…… 600-649… 31%
42nd…… 650-699… 15%
60th…… 700-749… 5%
87th…… 750-799… 2%
100th….. 800-850… 1%
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December 7th, 2008 at 11:51 pm
How many now believe the Volt will survive with oil likely to stay at the $40-$60 price per barrel rolling into 2010/2011. Saddened to think I can portend the answer. Everything tends toward microeconomic answers when contending with home purchasing. Without an activist government policy, there is no hope I suspect for a $40,000 Volt, or $30,000, and maybe not even at $20,000. Macroeconomically, the entire Western world would do well to free ourselves of oil and incentivize electric cars.
For those so inclined, may God help our countries.
US Air Force retired.
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December 8th, 2008 at 12:00 am
Question is not only auto industry : Look at your computer , ipod, cloths, utencils – any daily stuff ? any thing is made in USA/Canda ?
To be true :- Realize there is no manufacturing industry in US/Canda . Only sales sales and sales people. They make profilt saying we outsourced. They never realize the crime they are doing against the country.
Even a person buying import product is contributing the same crime. The first movement needed is called “Buy local products ” and promote local industries and not “Imported by xyz and packet in US/Canada”
Reforms start from you, not from Obama. He can add money and momentum.
This is time for Auto industry, lets see what else industries need aid.
Say you buy only if its made in North America.
#38 : Look at Chrsler 300 – I never saw such a beauty of AMERICAN design. Look at Dodge RAM or Jeep . Feel what it says to you.
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December 8th, 2008 at 12:26 am
Statik says:
Obama hinted at change this afternoon, “If this management team that’s currently in place doesn’t understand the urgency of the situation and is not willing to make the tough choices and adapt to these new circumstances, then they should go”
Well now, for my 2 cents worth, I see the ‘urgency’ being a baseline of 10 million vehicles per year, GM’s share 2 million, and a worst case being 8 million per year, GM’s share 1.6 million.
When GM can show break even at 1.6 million per year, I will believe they can dig themselves out and pay back the money. Chucking only 8 Billion at GM now is just an invitation for everyone to sit on their hands for another two months and wait and see what happens next. Death by multiple cuts I think.
Local Ford dealer gone now, big empty corner lot for rent.
/sigh
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December 8th, 2008 at 1:11 am
State intervention from Argentina!
Something else to think about!
BUENOS AIRES, Dec 6 (Reuters) – Argentine automakers will sell basic models at cost through state-subsidized loans in a plan to protect jobs in Latin America’s third-biggest economy from the global economic slowdown, government officials said on Saturday.
Local plants of Renault SA, General Motors, Peugeot, Ford Motor Co. and other automakers will participate in the government’s plan to protect 150,000 auto industry jobs and to keep production from falling steeply next year.
“We have agreed with the plants that these cars will be offered without a profit margin and the dealerships will also reduce their profit margin,” Industry Secretary Fernando Fraguio told a news conference on Saturday.
The $890 million government auto loans program is part of a $3.8 billion economic stimulus package announced on Thursday by President Cristina Fernandez.
Each automaker will offer two of its most economic models for the plan, while the government will provide three different financing packages with interest rates much lower than market rates, to be funded by the social security system.
Argentina’s vehicle output is seen at 600,000 to 610,000 units this year, up 12 percent from last year.
Officials said some 150,000 people are employed in the sector, including auto parts and auto sales.
Argentina’s auto manufacturing, which accounts for 36 percent of the country’s industrial exports, has been one of the first to feel the pinch as the economy slows, and executives forecast a 15 percent reduction in output next year which is what the government plan aims to avoid.
LJGTVWOTR
NO Plug NO Sale
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December 8th, 2008 at 1:38 am
#71 Statik
Yes, I just meant that as an owner your income for tax purposes will be understated relative to ordinary employees.
I still couldn’t find the graph you reproduced on myfico. I’ve seen the delinquency rates. I’m wondering if the percent of population relates to the first number. I can believe that 60% of the population has a FICO score of 700, but 750 seems a stretch.
FICO scores sure are amusing though. Having fifty million in net and unencumbered assets doesn’t affect it; having a balance of more than $1K on your credit card does. Gotta love it.
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December 8th, 2008 at 2:17 am
Speculation that they move UP the Volt’s production over here:
http://seekingalpha.com/article/109319-gm-s-volt-introduction-may-be-moved-up
Sounds credible.
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December 8th, 2008 at 2:57 am
#53 Dave G – Chrysler merger
It’s probably a fine idea but it seems like something that will be worked out over the longer term. The issue of course is price. I would not want to bail Cerberus out – it needs to get wiped out along with the other shareholders. Moral hazard and all that.
#67 nataraj – Huffington Post says Paul Krugman says US auto industry to disappear.
Well, one should never rely too much on the Huffington Post.
I was pretty surprised by the quote so I checked. What he said was “that the concentration of the industry around Detroit would disappear”, which is much more reasonable for a variety of reasons.
http://krugman.blogs.nytimes.com/2008/12/08/me-misreported/
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December 8th, 2008 at 3:00 am
#77 Neocon
OMG. Tagamet was right!!!! We may see the Volt before July 4, 2010.
Congrats Tag on the terrific call. Your unbending optimism may prove warranted.
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December 8th, 2008 at 3:09 am
Yeah.. Spring 2010
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December 8th, 2008 at 6:35 am
Here is a Paul Krugman article from Dec 1, explaining why a temporary increase in the deficit now is not a bad thing:
http://www.nytimes.com/2008/12/01/opinion/01krugman.html?partner=rssnyt&emc=rss
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December 8th, 2008 at 7:52 am
#23 statik said “I did the math on the old thread about how far GM lasts on a bridge payout of 8 billion (at the low end) to 14 billion (at the extremem high end) respectively.”
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Thank you for this posting and the numbers.
It always helps to have the program while you watch the show.
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December 8th, 2008 at 8:40 am
#76 DonC
#71 Statik
Yes, I just meant that as an owner your income for tax purposes will be understated relative to ordinary employees.
I still couldn’t find the graph you reproduced on myfico. I’ve seen the delinquency rates. I’m wondering if the percent of population relates to the first number. I can believe that 60% of the population has a FICO score of 700, but 750 seems a stretch.
FICO scores sure are amusing though. Having fifty million in net and unencumbered assets doesn’t affect it; having a balance of more than $1K on your credit card does. Gotta love it.
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That number represents the percentile.
ie) 60th…… 700-749… 5%
60% of the population is under the max range 749
87th…… 750-799… 2%
87% of the population is under the max range of 799
I think that is what Wagoner was getting at the hearings, GMAC is setting a baseline of a 770 score to finance…and only 6% of vehicles are now being financed at all. Makes sense if 87% of the population is at 799 or lower.
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Your right though, FICO does not account for unencumbered assets…the best kind (to us), but how well you shuffle/manage credit does.
When I was in my early 20s, I went to get a mortgage on my first house and it was kindly explained to me (like she was speaking to someone in kintergarden) that liquid assets were of ‘no value’ to her or my credit worthiness, and because I worked for myself and didn’t use credit very often I was virtually akin to a homeless person.
I incorporated my business later that year, so I didn’t ‘work for myself, (which was the best $400 I ever spent…made life a lot easier not having to check the ’self-employed’ box) and immediately started ‘doing the credit dance’ so I didn’t have to go through that again.
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December 8th, 2008 at 10:50 am
It’s amusing to see a bloated and corrupt Countrywide politico like Sen Dodd lecturing all of us that GM’s Wagoner must go. It is our government and courts that have handicapped American car manufacturers by making the UAW impregnable. Until that is fixed they are just throwing our good money after bad and no new model or ‘green’ car or anything else is going to address a fundamentally unfair playing field. We have met the enemy and he is us.
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December 8th, 2008 at 3:05 pm
If GM gets this bailout money, I want to see car magazines like Motor Trend, Car & Driver, Road & Track, Consumer Reports and JD Power singing the praises of GM’s new cars when they come out in the next 5 years. I want to see GM’s new vehicles become equal to or better than ANYTHING Toyota produces in quality and reliability, etc.
I want AWARD WINNERS and BESTSELLERS … in every segment … from subcompacts to midsize to crossovers … hell even the SMALLER number of trucks and SUVs that might manage to stay in production.
Get ‘er done GM !!!!
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December 8th, 2008 at 11:26 pm
I want a Chevy Volt. Hoping for one in my grage someday. Frankly, I think only $100 a barrel will save America – counterintuitive, but what else will force us to leave oil.
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December 10th, 2008 at 12:25 am
“One of the things the government can’t do is run anything. The only things our government runs are the post office and the railroads, and both of them are bankrupt.”
Lee Iacocca
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