The New York Times has published an interesting article outlining how the government may use the Chrysler bankruptcy process as a learning tool for how to reshape GM.
It is pointed out that the two companies are rather different. GM has three times the employees and twice the number of plants. According to Rahm Emanuel, Mr. Obama’s chief of staff, “G.M. is very different than Chrysler, but I suppose the one lesson for G.M., and all the other players, is that this is a moment when a Democratic president said, ‘I am really willing to let a company dissolve, and there’s not going to be an open checkbook.’ There’s got to be real viability.”
If the ongoing Chrysler bankruptcy works out well, it is likely that option may also be applied to GM. It is already a given that GM will not be liquidated and will survive.
GM’s most recent plan to cut 47,000 jobs, 12 plants, 4 brands, and 2600 dealerships has not yet been approved by the government and some fear may still not be enough to allow profitability in the current automotive market.
Chrysler’s secured bonds are expected to be covered by $2 billion in cash through bankruptcy which will be paid out to a total of 46 lenders. GM on the other hand has about 10,000 unsecured bondholders. The plan is for those debts to be traded not for cash, but for pure stock, 225 shares for each $1000 in debt. Beyond that, 55% of GM would then be owned by the government and 40% by the UAW.
The government now has all the leverage against bondholders who would otherwise be paid very little in bankruptcy court. Indeed, the fear of bankruptcy now hangs heavy over those bondholders heads as the government has already revealed its willingness to let Chrysler go that route.
Though Obama has stated he has no interest or skill in running car companies, he will have no choice as a 55% owner, though he hopes the government’s stake could eventually be sold for a profit.
However, Obama’s expectation for GM to produce low emission high-efficiency cars like the Chevy Volt may conflict with those profitability expectations. It is already well-known the Volt may not lead to profits for two or three generations and potentially hundreds of thousands of vehilce sales.
How the government will handle that dilemma remains unclear.
Source (New York Times)
This entry was posted on Saturday, May 2nd, 2009 at 8:26 pm and is filed under Financial, Politics. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
May 2nd, 2009 (8:35 pm)Where is everybody?
I do wonder if by 2010 it will be dawning on car buyers that there is a revolution on and they may best wait to replace their cars.
Will that make 2010-2011 very bad years for the auto makers?
May 2nd, 2009 (8:38 pm)However, 2012 and on should be a great opportunity for the electric cars, filling the need for replacement vehicles.
I hope..
May 2nd, 2009 (8:48 pm)Good point bruce g.
Auto Part stocks are doing well now as people make due with a repair rather than spending their food money on a new car. 10 year old imports with 150,000 miles are the common choice as the college commute vehicle.
We will reach a point when time and wear = a new car purchase. The idea of a quick restructuring for GM is right on target. People need to know where everyone stands long term before buying. I believe a future GM will be successful with the new generation of electric cars. Before this happens, people who have taken a personal gamble with stocks and bonds will need to pay the price for what could have been a fast gain.
I saw a NASCAR race today paced by a new Camaro. It really looked sweet. The E-REV Camaro is destiny.
=D~
May 2nd, 2009 (8:56 pm)Dave g,
That is interesting. My 20 year old Subaru is in the college commute class and I have decided to keep repairing it.
My local service center does a good job.
They are confident they will handle the electric cars whwn they come but commented on the blurring of the trades between the mechanic and the electrician.
May 2nd, 2009 (9:19 pm)Is there any conflict of interest issues with the government owning 55% of GM? With the gov’t setting the rules and regulations governing the industry, can any other car maker claim GM is getting an unfair advantage?
May 2nd, 2009 (9:19 pm)I would have to sell the Vette if Chevy does an EREV Camaro. The savings in parts and repairs alone would make it worthwhile.
May 2nd, 2009 (9:28 pm)There is a pent-up demand for new vehicles, which likely will unleash after settlements.
Yes, the auto service business has come back out of recession in about 70 percent of the shops (of 104) that I’ve trained techs in advanced systems diagnostics.
Spending on necessities is one of the first indications that the recession is ending, and, one of the most important necessities is to maintain and repair your vehicle.
(Transmission fluid changes are up over 80 percent over last year, which means that owners are really paying attention to doing that every 20,000 miles (especially here in the hot climate of Texas), to avoid a $2800 transmission overhaul.)
There is always an efficient way to do practically anything if you are creative and industrious enough, and, you want a Volt bad enough. The Voltec technologies are a major part of our way out of this carbon dioxide mess we’re in, and, the cost to bring GM forward in order for us to do that is an
****extremely low cost*****
in relation to the increasing-potential of a thermal-runaway toaster of a planet we are causing for ourselves.
The Voltec technologies are essentially a fixed (and mandatory) investment to buy us time and to change as much as is possible over toward a truer carbon-less economy, and, it just must be made to happen in a direct, swift, and relentless manner. It may likely be our last chance.
Dan Petit Austin TX
May 2nd, 2009 (9:48 pm)That is great news Dan. In some ways an economic collapse was fortuitous, at least from as seen by someone who does’nt want to pass a planet that looks like burnt toast to their grand children.
But no fun for the unemployed.
May 2nd, 2009 (10:13 pm)Saw a bit on CNN today. They noted that there were some 40,000 Chrysler production jobs on the line, and then something like 160,000 sales jobs.
160,000!!???!!!
RUFKM???
That’s 4 to 1 sales over production!
Anybody else see a problem here?
Anyone? Anyone? Bueller . . Bueller . . . ?
May 2nd, 2009 (10:22 pm)I think the auto companies will someday be viable again. Years ago, the railroad industry was in trouble, and failed railroad companies in the midwest and northeast consolidated under the government-run company, Conrail. It eventually became profitable and was sold to CSX and Norfolk Southern. I hope the same thing happens here with GM and Chrysler.
May 2nd, 2009 (10:25 pm)It’s a warning to the bondholders not to play hardball like they did with Fi-rysler, since the prime bond players held out until the last second and were told “too late”.
However, many speculative bondholders have credit default swaps to cover their investment, so they stand to make a quick profit in bankruptcy anyway. So this is working out quite well for them.
May 2nd, 2009 (10:26 pm)I think Chrysler will do just fine with the Fiat models coming in.
Just hope they get them here fast enough. Anyone know when they are expected to hit the pavement of Chrysler lots?
Yes their is a pent up demand. There should be sales of 14 million units a year. Now it’s under 10 Million.
Everybody better move FAST with new metal on the ground to earn the coming buyers. I have no issues with limiting Over Seas Mfg’s so we can get America strong again. It worked for Harley.
May 2nd, 2009 (10:28 pm)RE #1&2
I do wonder if by 2010 it will be dawning on car buyers that there is a revolution on and they may best wait to replace their cars.
Will that make 2010-2011 very bad years for the auto makers?
============
No plug no sale!
For those that keep cars for a long time, and are able to make do with their current car for a few more years, buying an ICE only car in the next couple of years would be a mistake in my book!
Ironically if E-REV and plugins are really successfully and the public buys into them, it would bankrupt all the auto makers, since so many people would delay purchase until the new technology is available in the show rooms.
Increased cost of early adoption is the limiting factor, and lack of public knowledge. So I doubt that there will be a BIG dip in sales caused by people waiting for E-REV etc.
I would like to see many people hold off (NPNS) because once a gasser is purchased it will be around for an average of 17 years glugging away.
NPNS NPNS NPNS NPNS NPNS NPNS NPNS NPNS !
May 2nd, 2009 (10:40 pm)#9 add,
……Statik…….Statik ?
May 2nd, 2009 (10:42 pm)was reading “New York police to start patrolling in Nissan Altima hybrids” in auto blog, I don’t understand why this happens when the domestic companies are looking for sales and taxpayer money to Imports ( i can understand if they go for ford fusion hybrid ).
from the news: The New York Police Department has just put its first alternative drive vehicles into patrol service with the arrival of 40 new Nissan Altima Hybrids. The department has assigned 18 of the Altimas as marked patrol cars while the rest are on unmarked duty. The new cars are being deployed in various areas of the city where the hybrids could be most beneficial. Previously, the department only used hybrid vehicles for duties such as parking enforcement as well as 10 GMC Yukon hybrids used by duty captains. The patrol cars bring the total hybrid fleet for the NYPD to 170 units.
At $25,391 the Altimas cost about $1,500 more than a Chevy Impala but they get twice the urban mileage at 35 mpg compared to the 16 mpg for the Chevy. The department also uses a variety of other vehicles including the traditional Ford Crown Victorias and the newer Dodge Chargers. The patrol cars will be evaluated for a year before the department decides whether to expand the use of hybrids for this use.
== From me
GM has to understand they are loosing the soil below their feet very fast.
The other part still not clear is why they didn’t go for ford focus because its the ONLY American hybrid.
One more question is Volt is mostly targeted for a person who works in office. Not a person who travels for work. Wondering what is GM’s solution for that target ( 2 mode malibus ? cruze ? hybrid cruze ? ex: for patrol target )
May 2nd, 2009 (10:47 pm)#14 carcus1 sys:
……Statik……Statik ?
============================
Boy, I’d love to really get into this….so why not?
I’m ready baby, strap in…its go time. I love threads like this.
Lets deal with the ‘bondholders’ first”
“The government now has all the leverage against bondholders who would otherwise be paid very little in bankruptcy court. Indeed, the fear of bankruptcy now hangs heavy over those bondholders heads as the government has already revealed its willingness to let Chrysler go that route.”
The bondholder’s are not ‘evil’ and the gov’t doesn’t have leverage anymore now than before. They are the senior debt holders…they are going to get paid. And if the gov’t wants Chrysler out of C11…they are going to pay, and more than 29 cents, just watch.
The ‘good’ or ‘compliant’ bondholders are almost exclusively ‘TARP recepiant’ bondholders….like JP Morgan who got a big pat on the back from Obama directly (who also got like 25 billion+ in TARP). The other big 3 debtholderswho capitulated? Goldman Sachs Group Inc., Morgan Stanley and Citigroup Inc….I’m sure that is just a coincidence though.
The ‘bad’ bondholders that the administration doesn’t ‘stand with’ are all evil hedge funds right? Obama said so. They also happen to NOT be on the take with TARP money, and selfishly expected to get paid a fair dollar akin to what they would receive in bankruptcy. The administration didn’t ‘show them whose boss’ by senting Chrysler in C11…these guys did. The government has no leverage over them…to get Chrysler out of C11, more TARP is going to have to accessed to pay them what they deserve.
Oh yeah, how about the few hedge funds that did support the deal, why did they do that? Are they good corporate citizens? Why did hedge funds York Capital Management & Elliott Management take the gov’ts offer of 29 cents? Hmm…maybe because they bought their debt just recently in the teens.
And are these ‘bad’ bondholders all evil suits on Wall Street as they are being portrayed? No, not really. How do we know who they are? Because they filed in bankruptcy court yesterday.
Some are, but a good deal aren’t. They are pension funds (public pension funds in Seattle, Sonoma County, California and Baltimore County, Maryland), universities (Yale, Kentucky), charities (like the Gates Foundation).
Why should the bondholders that Obama doesn’t ‘stand with’ take the deal. They have everyone saying in liquidation their bonds (which already cut way down) are still worth about 50 cents…why are they going to take 29 cents? If you are ‘Joe Public’ and you know your pension has a value of $100 and someone offers you $60 for it are you gonna take it? I doubt it.
May 2nd, 2009 (11:01 pm)#1, bruce g,
I am one of those that has not bought a new vehicle in over 5 years.
I’m also one of those that are soon to be in need of replacement vehicles for our household. I’m really hoping my vehicles hold out long enough for a plug.
So you may be correct in that many people are just waiting for the “next big thing” or, perhaps they are waiting for economic reasons.
I’m thinking that when times get a little better, there is going to be a rush on new cars as all of us that are waiting, jump back into the new car market with both feet.
For reference,
I’m 48
I wonder what the average age of us fellow EV followers might be?
~paul
(Lyle, glad you are here keeping up the good fight getting the word out.)
May 2nd, 2009 (11:04 pm)OFF WITH THEIR HEADS!!!
May 2nd, 2009 (11:05 pm)Onto Chrysler’s filing itself.
The gov’t is saying they are going to try to do this in 30 days. Well, still no 363 motion…and they can’t get back in there until the 4th. So at best they get a hearing for the last week of the month, (NY local rules require 20 days notice).
May 2nd, 2009 (11:15 pm)I think this was always the plan–it’s why Chrysler’s deadline was 30 days before GM’s. Obama wanted to show the bond holders that he meant business.
Unfortunately, 30 days really isn’t enough time for Chrysler to serve as a “test case.” I doubt we’ll have any resolution on the Chrysler front before GM follows them into bankruptcy. The only thing we might find out is how it affects sales. But even that’s iffy.
May 2nd, 2009 (11:29 pm)Numbers, numbers, who has the numbers? Bondholders? 29 cents on the dollar? 60 cents? Where do these numbers come bubbling up? I’m not criticizing the blogger or the source, just scratching my head along with a few million other Americans and people watching this drama.
As far as 4 to 1 sales over assembly workers, jeez, fellow bloggers you don’t believe the people posting who have written that labor is no longer the highest cost factor in building a car? What’s killing the automakers is simply lack of demand. I think all this talk of restructuring and UAW evil and wall street robber barons are to a degree just that, talk. If YOUR company saw a 30 to 60% decline in sales month after month are you going to blame your labor cost, finance cost, poor product lineup, marketing failure and government regulation? Of course you would! AND ALL THE BLAME IN THE WORLD WILL NOT INCREASE YOUR SALES!!!!!!!!!!!!!! Time is what is needed to restore health. The market WILL come back as this country and the world will have to replace the existing cars and trucks at some point. What is unique and fortuitous is the vehicles being readied now may just save our most unworthy hides.
Oh, to live in interesting times!
May 2nd, 2009 (11:31 pm)#11 Lurtz says:
“It’s a warning to the bondholders not to play hardball like they did with Fi-rysler, since the prime bond players held out until the last second and were told “too late”.”
——————-
Actually, the majority of the bonds were held by Tarp recipients. And they all agreed to the government’s final offer.
The non-tarp recipients, who are not dependent on the government, are still holding out, and will probably challenge the administration’s plan in the bankruptcy court. Yes, two gave in after Obama blasted them on national television. And, by then, it was too late. But I suspect that was more about public relations. No one wants to succeed AIG as public enemy number one. And, Parella probably wants to keep its job advising the government on various banking issues….
By the way, those holdouts include Yale University, and the Gates foundation.
http://www.bloomberg.com/apps/news?pid=20601087&sid=abKV6gDDWRDE&refer=home
May 2nd, 2009 (11:51 pm)“Yes their is a pent up demand. There should be sales of 14 million units a year. Now it’s under 10 Million.”
I don’t think there is any pent up demand. The 14 million figure is pre-recession in the economic bubble of the last 5 years. Going forward 10 million is probably the new standard if not even lower with the coming rising unemployment for probably the next 2 years. I think America has wised up to be more financially responsible and realized they don’t need new cars every few years.
May 2nd, 2009 (11:56 pm)As for this Chrysler bankruptcy paving a way for a GM reshaping?
Not so much. GM is like dodecahedron compared to Chrysler’s square. The shape is more complex, has many sides and faces… but even more importantly, GM is mostly international. Chrysler for the most part is all NA.
Chrysler is a relatively simple matter, it is merely beating old Chrysler into a gooey pulp and pouring yourself a new glass.
Same apples and oranges camparison goes for the bondholders as well…we are talking about convincing 100 odd players with Chrysler to do the swap…there are literally thousands with GM, and there is the nasty issue of default swaps worth how much? Crazy big, and the holders of those have no interest in making ‘deals’
—
What this process is doing is reshaping the way people look at buying bonds and is going to set a wicked precendent if the government suceeds with its intentions.
The gov’t thinks it can just jump in a dictate the bondholders only get 10% of the new company as compensation, while they get 50%? and the UAW 39%? Hows that now brown cow? The bondholders go from senior debt holders to ‘jack crap’ here…27 billion for 10%, now that is a cramdown.
No way bondholders budge here, they know what they should get in bankruptcy, and they are betting that a bankruptcy judge is going to uphold the intent and covenants of the process and award them their fair share…and you better too.
The system works because of rules and the expectation of fairness and execution of those rules. If the governments gets in here and screws them just because they want to go on the cheap and nationalize the domestic auto business, well that puts a whole new risk premium on US bonds. The United States is the country it is today for NOT doing stuff like they are proposing here. For being fair…for taking it’s lumps when it makes a mistake, and honoring commitments it makes…not rewriting/reinterpreting rules and legislation when it sees fit.
The bondholders bought debt with the understanding they are entitled to their fair percentage of the carcus if the company goes bad and can’t repay them…they are living by those terms they entered into now.
I have a feeling the bankruptcy judge is going to be the one reshaping the way the government deals with companies it plans to quasi-legally dip into bankruptcy.
As for, “‘I am really willing to let a company dissolve, and there’s not going to be an open checkbook.’ There’s got to be real viability.”
–I don’t see it, what is dissolving here? Could the gov’t have stated any clearer that GM is not going away? Talk about undermining a deadline. And “there’s got to be real viability?” Ok, sure, sounds good…can you point me to that? What and where is the viability plan that says Chrysler should go into this process? Or GM’s?
Bottom line is, if they want Chrysler and GM to go through a GSB, it is not going to be fancy threat number 67 that does it, and it certainly GM isn’t going to avoid C11 because of the fear from what happens from Chrysler.
The only model that is going to be learned here, is the same one they keep getting schooled on since last november, and that is the only way to keep these money pits going is to keep feeding them with a open checkbook, and if thats what they want to do, they need to just get used to it.
They shouldn’t even be worried about how much the GSB is going to cost, because the pain is going to be much, much worse on the other side when they realize they have to just keep throwing money at these two to protect the money they already spent…and the no win situation of public backlash that comes with have one of two choices going forward:
A) spending billions every month to cover the ‘new 3.0′s operating losses
-or-
B) not spending those billions every month/cutting their loses and letting them go under, then listening to everyone talk about them wasting a couple hundred billion for nothing…and how obvious it was they never should have done it in the first place
May 2nd, 2009 (11:57 pm)Statik,
I don’t know how you know so much about the non-car stuff, but I guess the politics are necessary to get this thing going.
LJGTVWOTR
May 3rd, 2009 (12:07 am)#20 LauraM said:
I think this was always the plan–it’s why Chrysler’s deadline was 30 days before GM’s. Obama wanted to show the bond holders that he meant business.
Unfortunately, 30 days really isn’t enough time for Chrysler to serve as a “test case.” I doubt we’ll have any resolution on the Chrysler front before GM follows them into bankruptcy. The only thing we might find out is how it affects sales. But even that’s iffy.
=====================
You right, there is no time to prove any points.
I mentioned this earlier, but the plan is to go 363…and to sell all the good assets to NewCo (which will be renamed Chrysler after the process is over), but you have the sticking point of a 20 days notice period. They still haven’t got the motion in, because the gov’t is…well the government. At best the hearing is the 25th. No chance we see a resolution that would threaten the GM bondholders to capitulate by the 31st. (in my opinion)
(nice post in #22 btw, hehe. I’m glad your on the forum now too. I enjoy reading your posts if I agree or don’t…you put a lot of work into them)
Anywhoo, I was going to keep droning on…but it is getting late. And probably only about half a dozen people are even mildly interested in this thread, lol.
/nite
May 3rd, 2009 (12:26 am)statik :
It’s much easier to agree with you when it’s late and you’ve lost the energy to be deliberately argumentative! You’re right – between Washington and Detroit 30 days is yesterday. With the atrophied state of GM management, one could barely hope to convene everyone necessary in that time frame.
One stance needs to be made on all of this : don’t let the big dogs swallow up the little ones. The big three must become leaner to survive, and need the added threat of small, profitable companies to force their hands.
I don’t want to be on here a year from now, bemoaning the fact that GM had a decent quarter and the government let them by Zenn (or any other comparable tragedy).
I love the concept of the volt, but the hidden side to NPNS is I’m going to buy the first electric sedan I can get my hands on. The electric car isn’t a top-fuel modified sprint car that takes two doctorates to service. If it runs on the highway to and from work and doesn’t leak (man, I wish my coddled 2003 GM-Oldsmobile Bravada could say that with more confidence.. damn Bravada/Blazer door hinges), I am SOLD.
Side note: I let myself watch ‘Who Killed..’ tonight, and I couldn’t help but remember Lutz advertising the Volt’s flaws on the Colbert report. He takes offense when people take shots at his ‘baby’ and company.. hopefully he won’t anymore. How hard is it to start up a Fisker dealership?
NPNS! =D~~
alternatively:
Plug + Doors + Wheels = SALE!
May 3rd, 2009 (12:33 am)#16/24 Statik
I completely agree with everything you said. The whole point of the US’s legal system is that we are a country governed by the rule of law. Not by the interests of whoever donated the most money to the Democratic party.
As much as I want to keep a manufacturing base in the US (and I do), it isn’t it worth it, if it destroys everything the United States is supposed to be about. And we’re doing this for Chrysler? A company that’s almost definitely going to fail anyway?
If they gave Chrysler DIP financing (which would give them priority over the secured bondholders), it would be one thing. Or bought off the creditors with a reasonable amount of cash. Or even changed the bankruptcy code. (Although then you’d have to worry about the constitutionality of applying it ex post facto.) But this?
ETA: Thank you. I enjoy reading your posts too.
May 3rd, 2009 (12:40 am)Do not buy a car from a bankrupt company. Anyone who does is a dimwit. If GM follows the pentastar path they are doomed. Sales will tank. GM just needs to drastically scale back all operations. Shut everything down for the entire summer. No Pay for anyone. Delay the Volt (it is a money loser at this point in time). Get real. Even the beaver could figure this out. If you don’t fix yourself I am sure the monkeys in warshington will do it for ya.
May 3rd, 2009 (12:40 am)The problem here is that common sense and following the rules already in place have all been thrown out the window.
The people running the government, allmost all being attornies, just believe that they can rewrite all the rules to suit their needs at their whim. And they seem to be getting away with it!
These are truly dangerous and scary times. It appears to me that this is simply the largest grab for power and pork spending I have ever seen. The Constitution is just being trampled, and no one seems to care. It is all about mis-direction. We are being told; “Look at the jobs we are saving”, but all I see are continued job losses, and the mounting debt that is going to really cripple us in the not too distant future.
But look at the bright side – the John Murtha Airport in Pennsylvania, really needed that 200 million dollars to upgrade the facilities for the six flights and 20 passengers per day that fly in and out of there….. And isn’t it just really neat that all of those flights go directly to Washington DC???? I am sure Rep Murtha appreciates being able to fly home whenever he wants.
Like I said, very scary.
May 3rd, 2009 (1:09 am)I think the Chrysler bankruptcy is a trial run for the upcoming GM bankruptcy. But don’t panic . . . I think bankruptcy will be a good thing for GM . . . it will help them eliminate/modify crushing debt payments, bad dealership arrangements, and difficult UAW contracts. I think bankruptcy is a needed rite of passage for GM in order for GM to successfully launch the Volt.
So it is nice to have the government and GM learn from the Chrysler bankruptcy before putting GM through the meat grinder.
May 3rd, 2009 (1:16 am)55% gov’t ownership?!??!?!
45% UAW ownership?!!??!?
I couldn’t possibly think of two worse owners for a company that needs to become more efficient and flexible. God help GM!
BTW- The Volt needs to be pushed heavily as a police patrol car, since it will be really efficient in that capacity and out-torque all the bad guys
The best hope for the Volt’s success, in my view, is massive fleet sales to government entities (and maybe companies). I hope someone gets on that and starts a program to replace as many govt vehicles as possible w/ plugins. They can be nice to everyone and buy Ford escape plugins + transit connect van and the Chevy Volt. This would be a much better use of government funds than bailouts, and help the automakers more directly.
May 3rd, 2009 (2:07 am)And it came to pass in the Age of Insanity that the people of the land called America , having lost their morals, their initiative, and their will to defend their liberties, chose as their Supreme Leader that person known as The One. He emerged from the vapors with a message that had no meaning; but He hypnotized the people telling them, “I am sent to save you. My lack of experience, my questionable ethics, my monstrous ego, and my association with evil doers are of no consequence. For I shall save you with Hope and Change. Go, therefore, and proclaim throughout the land that he who preceded me is evil, that he has defiled the nation, and that all he has built must be destroyed.”
And the people rejoiced. For even though they knew not what The One would do, He had promised that it was good; and they believed.
And The One said “We live in the greatest country in the world. Help me change everything about it!”
And the people said, “Hallelujah!! Change is good!”
Then He said, “We are going to tax the rich fat-cats,”—-
And the people said “Sock it to them!”
“—- and redistribute their wealth.”
And the people said, “Show us the money!”
And then He said, “Redistribution of wealth is good for everybody”
And Joe the plumber asked, “Are you kidding me? You’re going to steal my money and give it to the deadbeats??”
And The One ridiculed and taunted him, and Joe’s personal records were hacked and publicized.
One lone reporter asked, “Isn’t that Marxist policy?”
And she was banished from the kingdom!
Then a citizen asked, “With no foreign relations experience and having zero military experience or knowledge, how will you deal with radical terrorists?”
And The One said, “Simple. I shall sit with them and talk with them and show them how nice we really are; and they will forget that they ever wanted to kill us all!”
And the people said, “Hallelujah!! We are safe at last, and we can beat our weapons into free cars for the people!”
Then The One said, “I shall give 95% of you lower taxes.”
And one, lone voice said, “But 40% of us don’t pay ANY taxes.”
So The One said, “Then I shall give you some of the taxes the fat-cats pay!”
And the people said, “Hallelujah!! Show us the money!”
Then The One said, “I shall tax your Capital Gains when you sell your homes!
And the people yawned and the slumping housing market collapsed.
And He said, “I shall mandate employer- funded health care for EVERY worker and raise the minimum wage. And I shall give every person unlimited healthcare and medicine and transportation to the clinics.”
And the people said, “Gim’me some of that!”
Then he said, “I shall penalize employers who ship jobs overseas.”
And the people said, “Where’s my rebate check?”
Then The One said, “I shall bankrupt the coal industry and electricity rates will skyrocket!”
And the people said, “Coal is dirty, coal is evil, no more coal! But we don’t care for that part about higher electric rates.”
So The One said, “Not to worry. If your rebate isn’t enough to cover your expenses, we shall bail you out. Just sign up with ACORN and
your troubles are over!”
Then He said, “Illegal immigrants feel scorned and slighted. Let’s grant them amnesty, Social Security, free education, free lunches,
free medical care, bi-lingual signs and guaranteed housing….”
And the people said, “Hallelujah!!” And they made him King!
And so it came to pass that employers, facing spiraling costs and ever-higher taxes, raised their prices and laid off workers. Others
simply gave up and went out of business and the economy sank like unto a rock dropped from a cliff. The banking industry was destroyed.
Manufacturing slowed to a crawl. And more of the people were without a means of support.
Then The One said, “I am the The One – The Messiah – and I’m here to save you! We shall just print more money so everyone will have enough!”
But our foreign trading partners said unto Him, “Wait a minute. Your dollar is not worth a pile of camel dung! You will have to pay more…”
And the people said, “Wait a minute. That is unfair!!”
And the world said, “Neither are these other idiotic programs you have embraced. Lo, you have become a Socialist state and a second-rate power. Now you shall play by our rules!”
And the people cried out, “Alas, alas!! What have we done?”
But yea verily, it was too late. The people set upon The One and spat upon him and stoned him, and his name was dung. And the once mighty nation was no more; and the once proud people were without sustenance or shelter or hope. And the Change The One had given them was as like unto a poison that had destroyed them and like a whirlwind that consumed all that they had built.
And the people beat their chests in despair and cried out in anguish, “Give us back our nation and our pride and our hope!!”
But it was too late, and their homeland was no more.
May 3rd, 2009 (4:57 am)slowly and steadily with help of better batteries and tech we can reshape the prestigious auto industry and more there are going to be many newcomers like tesla ronn motors phoenix and bright and many others and they should be successful. we can build a global auto industry
May 3rd, 2009 (5:11 am)GM EV1 should be enough to show company’s in the motor industry not what to do in business.
May 3rd, 2009 (6:57 am)Good morning!
I read mosts of these posts, and my head hurts. I am trying to grasp what this all means and understand some of the basic financials, but boy, their are a LOT of details.
As much as I am not a financial guy, I actually found some of these posts “interesting”. The next couple months should be interesting….
Coffee is ready!
May 3rd, 2009 (7:19 am)#9 carcus1
The 160,000 sales people seems a bit high. If there are 2,000 Chrysler dealerships then they would need to average 80 sales types per dealership. I think all news services skew the news to suit their agenda. I can believe 160,000 employees in the Chrysler dealerships [total] prior to the massive layoffs that that industry has had as car sales went down. But nowheres near that number now.
May 3rd, 2009 (7:39 am)Lyle’s post is titled
The Fall of Chrysler Could be Model for Reshaping GM
———————————————–
One of the stranger aspects of the Chrysler bankruptcy is that it is programmed to deliver Chrysler to Fiat, a non-US company. So we have the President of the US bashing US citizens who lent money to a US company in good faith, in order to give the assets to an Italian company who, so far as I can tell, has so far invested zero into Chrysler.
All these steps seem to be justified as the pragmatic reality of how to get to the result of a successful company making cars in the USA. Believing that requires that one forget about Fiat’s previous attempts to sell cars in the US. (In fact I used to own one of them.) Generally people in the US did not find them attractive, except for the sports cars. The sports cars were fun but not well suited for colder weather. Among other things they were prone to underbody rust on all the parts where salted road slush collected, to the degree that there was a mandatory safety recall for many of them.,
So for Chrysler we have to hope that despite the Fiat track record, despite the dismal outcome of the last merger of Chrysler with a foreign owner, and despite the invisibility of future products that will be attractive to American customers, the renewed Chrysler will be a viable company because the government says it will be so.
I would like for there to continue to be a Chrysler that makes cars in the US, but the plan put forward seems very unlikely to succeed. From a political point of view, It seems to me that the best hope is for the next Fiat withdrawal and Chrysler close-down to be more than 4 years away. Maybe so.
A Dutch proverb says “A ship on the beach is a lighthouse to the sea.” Chrysler is that ship.
May 3rd, 2009 (7:58 am)Interesting thread with good posts, Have we come to a fork in the road?
Seems we have a choice…
Turn left and we have the Volt as the new “Peoples car”
Turn right and we have the cars of Havana…
http://www.cnn.com/2009/TRAVEL/03/24/havana.cars/index.html
Or will the implausible happen, like Tesla buying one of the folded factories.
May 3rd, 2009 (8:10 am)Statik, LauraM, Jim_I et.al
I’m so glad that there are knowledgeable, articulate people on here who can see and explain the bondholders stance. The “Bully Pulpit” treatment they’ve received (to me) seems unconscionable. Many off them are the “little people” who hold very conservative investments upon which they are relying for retirement.
Jim the worst part of Murtha’s 200 million airport pork is that the airport hadn’t even requested it, let alone being “shovel ready” (other than the shovel Murtha so often uses).
Anyway, thanks again,
Be well
Tag
PS If the Govt and the UAW hold a majority sale of a company, who negotiates the contracts????
LJGTVWOTR!!********NPNS
May 3rd, 2009 (8:18 am)Do you know what will be realy funny?
When the UAW owns 40% of GM and they decide to go on strike against themselves!!!
But then since the government will own 55%, I suppose we will call out the National Guard to build our cars, while paying unemployment to the striking workers.
I guess it is not so funny after all………..
May 3rd, 2009 (8:19 am)This pretty much settles it for me. If the government ends up owning 55% and the unions 40%. I would never in a million years purchase a vehicle from a company that is government owned. Supporting this transaction is un-American!
This isn’t bankruptcy, it’s a political move by obama to give power to the unions. A gift to his supporters. Anybody can see that. obama is a narcissist.
May 3rd, 2009 (8:25 am)As if the unions didn’t already have enough power?????
May 3rd, 2009 (8:32 am)#28 LauraM says:
#16/24 Statik
I completely agree with everything you said. The whole point of the US’s legal system is that we are a country governed by the rule of law. Not by the interests of whoever donated the most money to the Democratic party.
As much as I want to keep a manufacturing base in the US (and I do), it isn’t it worth it, if it destroys everything the United States is supposed to be about. And we’re doing this for Chrysler? A company that’s almost definitely going to fail anyway?
If they gave Chrysler DIP financing (which would give them priority over the secured bondholders), it would be one thing. Or bought off the creditors with a reasonable amount of cash. Or even changed the bankruptcy code. (Although then you’d have to worry about the constitutionality of applying it ex post facto.) But this?
ETA: Thank you. I enjoy reading your posts too.
===========================
Your right about why not just pay a fair price, and giving DIP financing? I really don’t have a problem with a ‘GSB’ if what it sets out to achieve and the precedent it sets is that under extraordinay conditions a bankruptcy can move quickly for the larger good.
Did all of this really fail because 30% of 6.7 billion dollars worth of bondholders wanted 45 cents (I’m averaging here to get that number) rather than the 29 cents offered (or 32 cents 2 hours before the deadline). Seems unbelievable after the piles of money that have been spent, heck they gave GM a billion dollars to then turn around and give it GMAC, to just push them past a regulatory hurdle, to become a bank holding company.
I honesty think they had no intention of doing a GSB with Chrysler. I think they gave them benchmarks they figured were not going to be achieved ie) close to GM’s requirements, plus a merger with a third party auto company.
On top of all this, what is the future? They have already said if Chrysler hits the benchmarks and is recreated they get ’6 billion and no more’…which of course they have already back off of and upped to almost 9 billion in total. But the point is the same, the Chrysler GSB is not open ended…the gov’t pulls them out of bankruptcy, then gives them a couple bucks (relatively speaking) and says, “don’t come back home son, your 18 now”
Feels like the end result is going to be the same, as in no Chrysler. We just get to feel good about it awhile longer. We are going to have Ford, and we are going to have GM. Only instead of just cutting Chrysler up and giving them to the domestic vultures, Fiat is going to get a share (if they themselves can surivive).
/I still can’t believe Fiat is in this mix at all, just doesn’t makes sense. (Well, it makes sense as in they have complementary product lines and the non-overlapping regionality of the two…but these are very unhealthy companies in one of the worst sectors). I wouldn’t be surprised to still see Fiat taken out/backing out of the ‘new’ Chrysler.
May 3rd, 2009 (8:37 am)Don’t guy anything from Chrysler or GM if the UAW gets a strong hold on the company. Ford or Japanese is the way to go!
May 3rd, 2009 (8:51 am)College kids are not driving around 10 year old plus cars with 150,000 plus miles because most college kids can’t do their own repairs (another lost art) and can’t afford to pay a mechanic $115 per hour to repair their car for them. I agree that many people may postpone a new car purchase. The inevitable occurs and newer transportation will need to be acquired. GM will survive not as we know it today and definitely not how we remember it in its heyday. The Volt is still a game changer. It’s technology will be copied and used in other GM vehicles as well as facsimiles in Toyota and Honda products as well.
May 3rd, 2009 (8:57 am)In discussing the keeping of your vehicle until the Voltec vehicles are out:
I need to warn everyone about something very serious and dangerous to the software in some of your 2002 and newer (luxury cars), and many 2003 through 2006 high-end cars, and all cars 2007 (CAN, controller area network) vehicles and newer.
Everyone needs to prevent expenses however they can, however they know how. Having everyone (and I do mean everyone) remain in the best financial position possible in order to afford a Voltec vehicle is the most important thing for me to do here.
HERE’S THE PROBLEM YOU MUST PREVENT.
Although I can’t name the name, there is an auto parts store that tapes two small packets of grease onto each of their automotive batteries for sale. The instructions on the packet tell you (or an installer) to coat the surfaces of the terminals with this grease.
I had been told twice by two managers at two different locations of that parts store chain, that this grease
“was di-electric” “it’s conducting”. NOT.
IT IS TWICE AS INSULATING!!! STARTER MOTOR RETRACTION SURGES ARE DESTROYING STARTING PROGRAM SOFTWARE!
***********************************************
LEAVE THE STORE IMMEDIATELY
***********************************************
The start-up software of accelerator position transducers, and, the security ignition key transponders in many vehicles will become damaged, and, the shop technician may not be able to tell the difference (if it needs reprogramming only, or the expensive part as well as reprogramming of that new part), and order you a new accelerator transducer or key transponder module at high cost (as well as the cost of the reprogramming in addition).
Certainly, you will have to pay for reprogramming the damaged software every time if that grease remains between terminal and clamp contact surfaces, OR,
MELTS DOWN IN BETWEEN THEM.
AND, YOU AND THE INSTALLER DO NOT KNOW ABOUT THIS.p
I do not like that battery spray-on coating either, but I have not been able to prove it does any software damage (as of this time).
(I use clear acrylic spray paint on the *outside* of the internally-shiny-cleaned terminals. Grease on the strands of those “add-on” clamps can do the same thing.
Costs for this type of damage ranges from between $180 to $1600 if the tech replaces an accelerator pedal position transducer.
Simply check the tops of the battery posts if there is grease, but be careful, because 35% of vehicles MUST have backup power to maintain important software programs, and, will lose many of them if the system voltage goes below 9.6 volts at any time.
The 12 volt battery has become a real pain in the wallet, so, don’t let just anyone replace the battery for you, and NEVER use that cheapest yellow battery, as the cheapest battery does not often fail safely to the transmission solenoids of Ford trucks.
Don’t try to be frugal with your battery. I highly prefer the OEM quality for just a very small amount more.
Software ought to be automatically backed up and rebooted in 2010 vehicles to revision one through seven, whichever runs that system the last-known-best.
At the end of this coming Summer, when the 2007 vehicles begin to start needing that 12 volt battery, HAVE AN L-1 ADVANCED SYSTEMS TECHNICIAN DO IT WITH BACKUP POWER APPLIED TO THE SYSTEM. It will not cost but about $16 to $24 to have it done the correct way. That way, when it is time for you to buy your Voltec vehicle, you will not be that $180 to $1600 behind in your financial positions for the Voltec vehicle you need.
May 3rd, 2009 (9:04 am)I will never buy a car built by our Govt and the UAW. I have no intention of supporting socialist America. In fact, I would support a resistance.
May 3rd, 2009 (9:05 am)#40 Tag says:
PS If the Govt and the UAW hold a majority sale of a company, who negotiates the contracts????
————————————
The UAW holds a big stake, but they don’t get control. They get one seat on the board (of 9) and they HAVE to vote with the independent directors…so basically they just get to watch.
The BoD looks like this:
4 – US Gov’t (3 independents -NYSE rules of independence)
3 – Fiat (1 independant – NYSE rules of independence)
1 – VEBA (in essence the union)
1 – Gov’t of Canada
Fiat can ‘buy’ another seat with a option to buy 15% more (and a seat). Then in 2013/2016 respectively, anothet 16%, which would give them control…but the gov’t isn’t ‘totally’ stupid, they have a rider that says they are capped at 49% until they (the governments of US & Canada) get all their money back.
The UAW has no interest in control here…it isn’t really the UAW anyway, it is the VEBA. And they need to monetize their share of Chrysler and GM as quickly as it makes sense for them….that money is spoken for.
==================
==================
#41 Jim I Says:
Do you know what will be realy funny?
When the UAW owns 40% of GM and they decide to go on strike against themselves!!!
——————————————-
It is amusing, because control or not, that is what would be happening.
As a sidenote: I believe the UAW used to have a seat for awhile in the ‘old’ Chrysler back in the day, but I can barely remember anything about it, because they were practically inert.
May 3rd, 2009 (9:21 am)#47 Dan Petit said regarding terminal grease that came with replacement batteries
I had been told twice by two managers at two different locations of that parts store chain, that this grease“was di-electric” “it’s conducting”
—————————————-
It is a strange thing to say as dielectric is often considered the opposite of conducting. That is, a dielectric material holds charges in place, while a conducting material allows them to move around.
May 3rd, 2009 (9:22 am)#9 (me) add again,
From USA today/Reuters:
Mike Brenner, who owns a Chrysler dealership as well as a Nissan dealership outside Harrisburg, Pennsylvania, said he regards a pruning of the dealer network as all but inevitable.
“There’s often three or four domestic dealers with the same franchise for every import dealer,” he said, noting that is out of balance given that domestic and import autos have roughly even market share. “If for every Nissan, Toyota or Honda dealer there are three or more Ford or Chevy or Chrysler dealers, those numbers are very difficult to make work.”
http://www.usatoday.com/money/autos/2009-04-30-chrysler-bankruptcy-dealers_N.htm
______________________
How does a domestic car manufacturer make money when it’s supporting 3 to 4 times the sales structure but sells no more cars than the import competition?
Anyone…. anyone…..?
P.S. On the bondholders and Credit Default Swaps: weather the players are little old ladies or high rolling 40 somethings in pinstripe suits should have no bearing on what’s fair or what isn’t fair.
May 3rd, 2009 (9:23 am)Statik@49 re negotiations
Thanks, but what I meant was that if they are at the table and want to “improve” their contracts, that runs contrary to the profit made on each car. So will they want benefits or a successful company that carries their jobs? ((that’s a rhetorical).
Thanks again.
Be well
Tag
/letters
May 3rd, 2009 (9:25 am)#41 Jim I Says:
Do you know what will be realy funny?
When the UAW owns 40% of GM and they decide to go on strike against themselves!
————–
Then statik #49 adds
It is amusing, because control or not, that is what would be happening.
——————————————————
Maybe it will be the trustee of the UAW VEBA on the Chrysler side, so that in effect the differences will be between the UAW retirees and the UAW current workers.
May 3rd, 2009 (9:37 am)My next car purchase is based upon the up coming Gov CLUNKER law allowing me to trade in my 89 wagoneer (for aprox $3000-5000) toward a new American built car that gets at least 27 mpg. The german clunker law allowed the Germany car market to jump up aprox 40% in sales over the last few months.
If the American version comes out over the next month or so I see a lot of Ford Fusions/chevy colbalts being sold. I wouldv’e actually considered a Volt BUT it won’t be out until late next year. Chevy bad timing again
http://www.projo.com/projocars/content/ca_cashforclunkers_04-05-09_RRDTLDM_v5.189fa59.html
May 3rd, 2009 (9:38 am)Thank you to all who commented that the unions and workers should take further wage and benefit cuts. I recommend that you be the first to volunteer to take wage and benefit cuts and see how it works for YOUR family. Thank you. PS, workers in this country have had wage and benefits cuts for the last 30 years. Here we are now in the worst recession since 1920s. See how well it’s worked so far???
It’s time that companies started acting smarter, the American worker should embrace robotics to aid their already superior productivity. We can once again be the leader in global production with correctly applied robotic assistance. We have all the pieces, someone just needs to put them together and have guarantees for workers so they won’t lose their jobs. Let’s go America!
Second, it looks like the market is going to sail past the gas/diesel engine and head straight toward battery electric vehicles (BEVs). In 5 years (if current efforts continue) there will be no excuse for any company to continue making internal combustion engine cars. I’ll tell you this: I’ve bought my last one. My next vehicle will be all electric drive or a used ICE clunker that I will convert to all-electric. No more of my money will go to fund the terrorists and continue our slide to global environmental meltdown.
May 3rd, 2009 (9:45 am)Clarification:
Regarding grease between the contact surfaces:
The problem is that the torque required to be applied between the contact surfaces does not attain or remain applied, and thus, continuity FAILS. This is even more pronounced on GM side mount terminals, where engine vibrations shift the connection side to side with this grease, so, the grease not only is a barrier from the molecules of metal to molecules of metal, but, it is a lubricant for the clamp to rise off of the tapered post with the normal heating and cooling of the metals. In addition, there is something called “cold creep” that pertains to the characteristic of lead: Lead moves away from torque.
While I wanted to remain less technical, the problems with grease remain, and, this genre’ of placing grease on battery terminals is now as repeatedly widespread as it is unwise. Use clear acrylic spray paint, and, those surfaces will remain corrosion free for many years.
A battery does at least 7 jobs, not just to start the vehicle. Down through the years of added technologies, it is a very overworked and over-utilized part of the vehicle. That grease is not in fact a conductor as it behaves as an insulator (and, many customers generalize they can do anything to those critical contact areas as long as the engine doesn’t blow up in their faces), nor does it allow for contact the same way that metal to metal conducts for ALL of those 7 different types of jobs the battery must perform perfectly for software safety especially.
I have privately warned those managers 4 times over the last 6 months of this problem, as 18 of my shops have had to deal with this technical disaster that they are causing, yet they apparently refuse to do anything about it as far as I know at this time.
I appreciate your request for clarification so that this problem might be more readily remedied by other people going there (or not going there).
Dan Petit Austin TX.
May 3rd, 2009 (9:49 am)#51 carcus1 said:
How does a domestic car manufacturer make money when it’s supporting 3 to 4 times the sales structure but sells no more cars than the import competition?
Anyone…. anyone…..?
P.S. On the bondholders and Credit Default Swaps: weather the players are little old ladies or high rolling 40 somethings in pinstripe suits should have no bearing on what’s fair or what isn’t fair.
=========================
A sizeable chunk (or piece of the puzzle) of being competitive with foreign transplants (namely Toyota) is the problem at the dealer level. Not just that there is so many more (6,700 v 1,200), but you also have to have a support/delivery system for all those dealers.
The fact that GM is a domestic automaker, that makes their ‘at home’ dealer network many times more inefficient than the others. It has grown over 100 years and the locations and the system developed have built on top of themselves, there is a lot of redundancy. Whereas, Toyota’s system was built at a arm’s length and makes more sense.
Their (GM’s) advantage in the past was the hometown advantage; the goodwill, the building cars in NA for sale in NA rather than coming across the pond, favorable tax breaks and incentives for operating here…unfortunately that advantage has evaporated over time, and has been replaced with things like inefficiencies in the process, too much upper management, incongruent product lines and escalating labor/pension/healthcare costs due to repeated capitulation to their domestic workforce’s demands.
/hopefully the GSB can rectify some of these problems…and hopefully that is good enough so that we all get a Volt
May 3rd, 2009 (10:01 am)#51 carcus1 said:
How does a domestic car manufacturer make money when it’s supporting 3 to 4 times the sales structure but sells no more cars than the import competition?
Anyone…. anyone…..?
Because most sales people earn straight commission and little to no health benefits.
May 3rd, 2009 (10:04 am)There is a lot that goes on in bankruptcy, but I believe the majority of the public don’t want two things:
1. Chrysler-GM to go away
2. The government to run either of them.
There is a growing swell of current GM buyers who might walk away from GM as a protest statement. Personally, no matter how good the Volt is I will not buy GM if the government runs it.
Don;t get me wrong, GM and Chrysler haven’t made money or much money for very good reasons. The current answer being floated by the very progressive (read huge government involvment) congress and President is wrong in principle and most likely would destroy both brands. The only hope for the Volt (and therefore GM) is the bond holders don’t down and fight for majority control. To be honest, GM needs a guy who knows how to make a buck running the company. Paging Mr. Gates…
May 3rd, 2009 (10:04 am)A bit off topic , but something most people here would like to know about .
Top speed is governed at 60 mph , the price is in European currency , the driving range is 500 km with lithium battery , no fuel required , plug in electric .
http://www.alibaba.com/product/jiayuanev-11993404-0/Happiness_Angel_Electric_Vehicle.html
A note about the factories of China and the quality of goods they produce .
The quality of the products is determined by the buyer , not the maker . The buyer must first approve the product and the quality BEFORE production begins as all products are made to specifications of the buyer .
What happens is that some greedy buyers go to China and buy products that are intended for domestic consumption by the poor Chinese and they buy these cheap poorly made products and then sell them in America to make a fantastic profit for themselves . It is our fellow Americans and Canadians who bring the cheap junk in and dump it on poor unsuspecting customers . In China there are two grades of most everything , The cheap poor quality products are never intended to be sold outside of China .
You want good things , then you tell the factories that you want good things . If you want excellent quality then you tell the factory that you want only excellent quality and that is what you get .
If you want cheap junk you tell them and they will make that for you as well , but you must approve it first .
The same principle applies to cars as well , the Chinese want quality cars too and it is the law in China that all cars be built to safety standards that are like our American standards .
May 3rd, 2009 (10:11 am)Sorry it wouldn’t save my edit….
From what I have read the dealerships survive on the large increase in service….many repair shops are doing well currently…however more dealers to close that’s for sure.
People are holding onto vehicles for fear of parting with money and committing to new payments.
The vehicles must be replaced as none last forever hence the pent up demand that is there. Like hair cuts and shoes cars too must be replaced. The sales increase is coming.
Your going to see many new generation Ford Fusions selling and I see the new Taurus being a hit.
I hope the Cruze and Volt hit the pavement sooner than later and the Chyrsler Fiat vehicles ready to roll.
May 3rd, 2009 (10:12 am)#47 Dan Petit,
I think RB found the problem here (and it’s not the un-named auto parts store). If the tube says “dielectric” it’s an INSULATOR! It’s supposed to go on the terminals AFTER MAKING THE BATTERY CONNECTIONS! Dielecric grease is used to seal out moisture, not for conductivity. – - – – - – RTFI
sheesh, turn off the caps and stay away from my car.
May 3rd, 2009 (10:30 am)#62.
You missed about 12 of my points. And, your attention to detail and intellectual diligence is not as widely applied where there are people who believe that tearing open a packet of grease needs instructions to be read. This is a problem with that auto parts store chain’s upsell marketing to make up for losses in their battery contract costs as I was told. It is OK for some to learn the hard way, but most here would want to know about this problem I’ve proven time and time again, in the real world where I have the responsibility to instruct technicians in diagnosing repeated damages from this situation. There so much to teach every single one of them, and, I never have time for something at all frivolous. It is my job to teach only critical things every workday, no matter who believes me or not. Please read my clarification which likely posted after yours. Best regards.
Dan Petit Austin TX.
Dan Petit Austin TX
May 3rd, 2009 (10:33 am)#57 Statik,
Thanks for the info. I’m sure the UAW would have preferred GM and Chrysler to attack that problem before they got into wage concessions. If they could eliminate 2/3 of their dealer overhead that would seem to be a huge piece of the puzzle.
May 3rd, 2009 (10:50 am)#63 Dan Petit,
If you don’t know what the problem is, it’s pretty tough to find the fix. (Unless you just want to start shot-gunning parts until the thing starts working.) The problem you’re apparently talking about is misapplication of dielectric insulating grease, not inferior batteries or inferior grease. I’ll troubleshoot and replace my own battery when needed, thank you very much.
May 3rd, 2009 (10:55 am)#30 Jim I / #33 Open-Mind/ #40 Tagamet
As angry as I am about ignoring the bankruptcy code–this is not the first (or the last) time we’ve seen a blatant abuse of power. But it is the first time I’ve seen the government attack the basic fundamental legal principals that underlie our economy. Contract law. Bankruptcy law. You can’t do that and have a functional economy. Not in the long term anyway. It’s possible people will view this as a one time thing. Or it will get lost in the larger credit crisis. But that’s a pretty big roll of the dice.
And its the first time I’ve seem them do it in plain view of the public. Usually, things like this come out later, and there’s a scandal. Here the President of the United States is getting righteous with the people he’s ripping off.
That said, we do have checks and balances for this kind of thing. It’s up to the bankruptcy judge now. Hopefully, he won’t cave to the administration. This is why we have an independent judiciary. Hopefully, the system will work as it’s intended to.
It’s entirely possible that that’s what Obama wants–this way the UAW can blame the bankruptcy judge. But, if that’s the case, he spent an awful lot of taxpayer money in order to basically pass the buck. And hurt GM’s chances in the process. Not to mention Ford.
May 3rd, 2009 (11:04 am)I hate to say it, but I am jumping aboard the “not going to support GM/Chrysler” bandwagon” anymore. They just come with too much baggage. In contrast, I really admire how Ford has handled themselves through all this. I’m always been more of a Toyota/Honda guy, but I am would really considering a Fusion Hybrid right now.
May 3rd, 2009 (11:11 am)#56, 63, Dan Petit.
Ok. I read the #56 post now. Makes more sense. Maybe the best thing on those types of terminals is just to skip the grease altogether.
p.s. If we’re discussing battery post terminals on an Chrysler bankruptcy thread on a GM volt website that’s “on topic” right?
May 3rd, 2009 (11:11 am)#38 RB
I totally agree about Fiat. Basically, even if by some miracle, this bankruptcy/forced merger actually works, they’re giving Fiat, an Italy company, most of the upside.
So the best case scenario is that we’ll wind up with yet another foreign transplant. The engineering and corporate jobs will still go overseas. We already have numerous foreign transplants here. The only difference is, of course, that they’ll employ UAW workers instead of non-union workers. And for that we’re risking over 10 billion of the taxpayer’s money?
May 3rd, 2009 (11:51 am)Re #28 LauraM
There is rule of law only as long as the Federal Government wishes it to be so. All you have to do is observe the immigration issue, the stealing of identities (social security, drivers licenses etc.) all of which are controllable but are not.
————————————————-#33 Openmind
Yours is and is forever more the best of all the posts.
Congrats!!!!!!!!!!!!!!!!!!!!
May 3rd, 2009 (11:52 am)# 44 Statik
I think you’re right that the government didn’t expect the Fiat proposal. The original plan was probably to liquidate Chrysler, and, therefore, shake up the GM bondholders, dealers, and the UAW. Now, we’re going to wind up in basically the same place, only spend a lot more time and money to get there. Time and money, that IMHO, should have been spent on GM, which actually can be viable. Not to mention taking up market share in the meantime, which hurts GM and Ford.
In a way, I almost have to admire Nardelli. He pulled off the remote possibility that some of Chrysler’s employees might stay employed. As well as the Chrysler name, for whatever that’s worth. And Cerberus gets to keep Chrysler financial with all it’s current loans. (And then there’s GMAC…) I still think he’s a horrible CEO, but he did his job. And, in fairness, I doubt anyone could have saved Chrysler.
Re: #57
GM, Ford and Chrysler also had a huge technological lead in the 50′s, 60′s, and maybe even the 70s. There was time when North America really did make the best cars in the world. Toyota never would have survived if Japan hadn’t protected its home market back then. Unfortunately, the big three became an oligopoly, and evolved all the associated disadvantages.
In fact, their past strength is part of what’s hurting them the most right now. It’s why they gave into so many of the union demands. And its why they have so many retirees and dealerships. (This is one reason Ford is better off than GM. And if Daimler hadn’t drained Chrysler of all of its resources, they might have been viable. They were smaller during the good years.)
May 3rd, 2009 (12:02 pm)# 60 Keith
I’ve read the exact opposite about the Chinese manufacturers in numerous places. That they agree to provide one thing, and then cut corners without informing the importer. And, frankly, I find it very hard to believe that a company like Mattel agreed to have lead in their toys in order to save money. They have a reputation to uphold
And Baxter International certainly didn’t know about the heparin in advance. And, even if they did–if it was made in the USA, the FDA inspects factories here. Canada, Europe, Japan, etc. also have quality controls. China doesn’t. And the FDA doesn’t have the manpower to inspect Chinese factories. The Chinese take advantage of that.
There’s a very good book that came out on this subject recently. It’s called “Poorly Made in China.”
May 3rd, 2009 (12:06 pm)______________________________________________________
Lyle’s Blog article said:
“…Obama’s expectation for GM to produce low emission high-efficiency cars like the Chevy Volt may conflict with those profitability expectations. It is already well-known the Volt may not lead to profits for two or three generations and potentially hundreds of thousands of vehilce sales…”
——-
My thoughts on that:
Option #1:
Kill or delay the Voltec Program to redirect available cash towards more immediate profitable adventures:
Result: GM abandoning/delaying GM’s “Moon Shot” will result in the forecasted gains being nulled due to public (including Voltec Heads), GM’s own employees, and GM’s franchise dealership network further loosing confidence that GM can transform itself to an innovative & profitable company. Also, the Electric Car Revolution will go into full swing with the release of the competing 2010 EV/EREV cars…with or without GM. The car makers that are not today participating in the Electric Car Revolution will find themselves quickly left behind.
Option #2:
Allow the Voltec Program to launch as currently advertised:
Result: A dollar wise costly “Moon Shot” for GM but a successful launch of the first generation of Voltec cars that will allow for the critical first generation of early adopters to purchase Voltec cars and evidence that GM is capable of transforming itself into an innovative car maker. Early entry by GM in the Electric Car Revolution will allow GM to adopt the Voltec Platform to other GM portfolio lines and through economy of scale profitably compete in the Electric Car Revolution.
Option #3:
GM is done for; don’t waste another $1 of taxpayer money on GM…shut her down and let the more lean and innovative car makers quickly fill in the resultant void.
As a taxpayer underwriting/supporting GM (involuntarily), I hereby cast my single vote for Option #2. Second in place, Option #3.
PS…way to GM-VOLT.com commenter’s! This is a particularly rich blog thread with many well reasoned and articulated points.
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Electric Cars + Nuclear Energy = American Energy Independence!
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May 3rd, 2009 (12:13 pm)Given the references to the Constitution, I’d highly recommend the book The 5000 Year Leap by Skousen. Frankly it’s pretty dry reading, but it sure clarifies the founders thoughts when they put pen to paper. Nothing remotely like this book’s contents was presented at any point in my academic experience (but then again, the ink was still wet on the Constitution when I was in school).
Be well,
Tag
May 3rd, 2009 (12:23 pm)I’m afraid GM is not cutting enough. It is obvious that they need to cut a minimum of 120,000 jobs and at least 5,000 dealerships. I would strongly urge President Obama to not except anything less. Do it right or don’t bother. The axe needs to swing deep and wide, every part of GM needs to be hit extremely hard. Unfortunately this means the Volt should be delayed for the overall welfare of the corporation. I am confident Obama will do the right thing and fix this steaming pile of dung that the previous administration and incompetent CEO left at his doorstep. Yes We Can !
May 3rd, 2009 (12:29 pm)#69 LauraM says
So the best case scenario is that we’ll wind up with yet another foreign transplant. The engineering and corporate jobs will still go overseas. We already have numerous foreign transplants here. The only difference is, of course, that they’ll employ UAW workers instead of non-union workers. And for that we’re risking over 10 billion of the taxpayer’s money?
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Yes, exactly. In the best case, Chrysler will be an Italian version of Honda, designing elsewhere and building in the US. The difference is that Honda probably will do more design in the US than Fiat.
Beyond that, the heavy-handed treatment of bondholders will make everyone thinking about bond purchases more cautious, as manipulation of the bankruptcy process increases risk. We need the reverse, absolute confidence in impartial government procedures
May 3rd, 2009 (12:30 pm)I have no knowledge on the subject of a reasonable ratio of dealership employees vs. car manufacturing employees — you may as well ask me the orbital velocity of Mars — but one thing I do know, is that I have yet to meet a robot that tried to sell me a car.
And I truly think that Gm-volt is the last refuge of the eliminationist class-warriors. Seriously! (Well, maybe here and lucianne.com.) You guys should get federal recognition for this as a protected refuge for your endangered species. A hundred years ago you guys would have been top-hat-and-tails cigar-smoking Steel-age barons in private clubs. Now you’re just guys wearing discount-store clothing with bad hair typing angry screeds online. (From your imaginary mansions in the Hamptons, no doubt.)
May 3rd, 2009 (12:41 pm)I would like a foreign company to rescue GM, much like Fiat has become the savior of Chrysler. I am sure Fiat engineers will show Chrysler engineers how to properly build quality small cars. GM needs such a savior, perhaps Nissan or a Chinese company that know engineering. It is abundantly clear that GM needs engineering help desperately, especially with smaller cars. GM engineering has suffered drastically in the last 10 years, they are utterly inept. They have brought shame to their cause. GM should have done so much better than they have, such a pity.
May 3rd, 2009 (12:46 pm)#77 Lurtz says
A hundred years ago you guys would have been top-hat-and-tails cigar-smoking Steel-age barons in private clubs
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Gee I wish I could have lived a 100 years ago.
May 3rd, 2009 (12:56 pm)______________________________________________________
#75 Martin Winterkorn Said:
“…the Volt should be delayed for the overall welfare of the corporation…”
——
I wonder if the above poster is VW’s Martin Winterkorn that also believes “ plug-in electric vehicles will become the fuel-saving technology of choice in the coming years.”
http://www.autobloggreen.com/2008/06/16/vw-is-ok-with-eu-co-sub-2-sub-targets-proposes-nuclear-power/
Winterkorn Profile: http://en.wikipedia.org/wiki/Martin_Winterkorn
Assuming that the above comenmeter is VW Winterkorn, question becomes what does VW gain by the Volt being delayed?
There is not much press about it but I’ve head through one of my back channel connections that VW is very aggressively developing a plug-in platform that VW believes will transform their entire portfolio lines.
Perhaps investigative reporter Lyle Dennis can follow up w/ VW Winterkorn and ask him if the above was indeed VW Winterkorn’s comment post and if indeed VW has an aggressive plug-in program in development that will be competing with the Volt.
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May 3rd, 2009 (1:33 pm)I agree with Mr. Winterkorn on both fronts, electric vehicles are the only choice and we all (Germany, the US, everywhere) needs to vastly increase the number of nuclear power reactors in use.
For every nuclear power plant the so-called environmentalists have blocked 2 or 3 coal-fired plants were required. We need electricity to power our homes and industries. Deal with it.
GO NUKE POWER!
PS, the new designs for nuclear power plants will be inherently safe (cannot meltdown), will greatly decrease the problems with nuke waste and with standardization and modular designs will be cheaper to build. And with reprocessing that “waste” will actually turn out to be one of our most valuable assets as only ~5% of the fuel in a standard nuclear fuel rod is actually consumed. That leaves 95% to be harvested by reprocessing. Why throw it away? That’s like a coal miner tossing out truckloads of gold because it can’t be burned to make power. Duh!
May 3rd, 2009 (1:36 pm)It’s not Winterkorn. He would have used “vill” instead of “will”.
May 3rd, 2009 (1:46 pm)GMs fall can be used for Fords reshape :p
May 3rd, 2009 (1:51 pm)As I said yesterday, the government will learn what it can get away with during the Chrysler bankruptcy. They will use that information to tailor their plans for GM. This administration has a problem with being “full of itself” and can see itself as the answer to all problems. We are all going to regret the results on the bankruptcy on our economy and our country. May God have mercy on our country because the administration will not have any. They intend to remake our economy and they believe they have been put in the position to remake the whole world.
I am not in agreement with the government or the UAW owning any part of the auto industry. Loan them money, yes. Make them repay, yes. Require them to restructure and retool for today’s needs and tomorrow’s newer needs, yes. But, own most of GM and Chrysler, No.
I realize I may be one of the few on this site who seem to be worrying about government intervention in the auto industry. But, take a few hours and really look at the people in our government who will be calling the shots and tell me these are trustworthy people to run these corporations and make decisions that will be set in concrete.
May 3rd, 2009 (2:46 pm)All this sympathy for bondholders is entirely misplaced because it misses the point that this is not a standard bankruptcy. If this were a standard bankruptcy then the standard rules would govern. Under these rules the senior debt — bought by what is accurately called speculators — would be satisfied before junior debt.
But this isn’t a standard bankruptcy. It’s a taxpayer bailout, which is more akin to an act of charity than anything else. And the prevailing rule is that a charitable contributor gets to set the rules. If he/she/it decides that junior will be senior then that’s he way it should and will be. When you’re a beggar you get what’s given to you, not what you think you deserve. If you don’t like it you get to lump it.
If the bondholders could get DIP financing then they they’d have a compelling argument. In fact they wouldn’t need to make it since everyone would recognize the senior nature of their claims. But they haven’t, and their chances of doing so are between slim and none. In fact, if they could have they would have lined some up. Since they can’t, arguing its “unfair” for the government to set rules that disfavor their financial interest seems like a joke. Having already been the recipients of hundreds of billions in government largess, hedge funds are in no position to bemoan the fact that the government is now handing it out to workers.
The simple fact is that if the government doesn’t show up with the bag of money then bondholders get virtually nothing. If the government does show up with a bag of money, and gives the bondholders more than they would receive in the absence of the handout, then they need to take the money, shut up, stop complaining that another group is getting “more than they deserve”, and move on.
My guess is that this is the way a bankruptcy judge will see it. We’ll know soon enough starting Monday.
Finally, the claims that the large banks are willing to take less because they are TARP recipients is a junk argument. This is no different than land acquisition in the absence of condemnation. The game is for the small players to hold out and get more than the bigger players. If you’re a big player and hold out you mess up the deal completely. You can only play the holdout game if you’re a small fry. The larger institutions know how the game is played, and they also know that if the government doesn’t bail them out they’ll get less than they would if the government ponies up. So they’re just doing the rational thing. (In fact there probably is pressure from TARP but ultimately they’re doing what makes sense and what they’d do otherwise).
May 3rd, 2009 (3:15 pm)You are absolutely positive its the engineers fault?.. I think the fault lies at the feet of the short sighted bean counter that traded quality for immediate savings… and once you piss off a customer you got problems.
>>>>>>>>>>>>>>>>>>>>>>>>
#78 J. D. Rockefeller Says:
May 3rd, 2009 at 12:41 pm
I would like a foreign company to rescue GM, much like Fiat has become the savior of Chrysler. I am sure Fiat engineers will show Chrysler engineers how to properly build quality small cars. GM needs such a savior, perhaps Nissan or a Chinese company that know engineering. It is abundantly clear that GM needs engineering help desperately, especially with smaller cars.
May 3rd, 2009 (3:23 pm)You need to have lots of on-site inspectors to monitor the quality, you start having problems when you skimp on that.
The chinese are very cut-throat competitive.
……………………………..
#72 LauraM Says:
May 3rd, 2009 at 12:02 pm
# 60 Keith
I’ve read the exact opposite about the Chinese manufacturers in numerous places. That they agree to provide one thing, and then cut corners without informing the importer.
May 3rd, 2009 (3:25 pm)it is interesting that the Fiat Group is in talks for GM Europe which includes Opel and Vauxhall. The Fiat Group also produces Maserati, Alfa Romeo, and Ferrari. I believe these conglomerates are positioning themselves to supply us with the newest technologies and platforms such as the Voltec platform in the nearest possible time. Chrysler will benefit from technologies not only designed in the US but in Europe. All this is great news for the domestic and International markets.
May 3rd, 2009 (3:47 pm)#71 Laura M says:
# 44 Statik
I think you’re right that the government didn’t expect the Fiat proposal. The original plan was probably to liquidate Chrysler, and, therefore, shake up the GM bondholders, dealers, and the UAW. Now, we’re going to wind up in basically the same place, only spend a lot more time and money to get there. Time and money, that IMHO, should have been spent on GM, which actually can be viable. Not to mention taking up market share in the meantime, which hurts GM and Ford.
In a way, I almost have to admire Nardelli. He pulled off the remote possibility that some of Chrysler’s employees might stay employed. As well as the Chrysler name, for whatever that’s worth. And Cerberus gets to keep Chrysler financial with all it’s current loans. (And then there’s GMAC…) I still think he’s a horrible CEO, but he did his job. And, in fairness, I doubt anyone could have saved Chrysler.
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Indeed, Nardelli has done much better than he did at Home Depot (although I don’t know how he could have been worse, lol). He is a strange guy…he was so highly touted coming out of GE, and poof, 6-7 years later he is getting crowned-’one of the worst CEOs of all-time’
I think he took whatever job he could find coming out of HD…he gets nothing for his time at the helm of Chrysler…but maybe they let him show his face around the CC again, heeh.
May 3rd, 2009 (4:08 pm)#81 CS Guy
You might want to ease back on the kool aid. Nuclear waste is like gold! Wow.
Nuclear is an option, but not the best option. Too expensive, non renewable, produces waste, and has inherent danger (no matter how small). It was a great 20th century solution, but should stay in the 20th century.
May 3rd, 2009 (4:29 pm)Electric cars will free us from Foreign oil. Once our nation is electrically aligned, the savings will be $600 billion a year. For those counting the taxpayer money, which is a loan, thats a pittance. Let’s save our auto industry and save it for one purpose, to save the nation.
US Air Force retired. – no more middle-east tours for our sons and daughters.
May 3rd, 2009 (4:51 pm)______________________________________________________________________
Follow up to my #80 CDAVIS post:
Martin Winterkorn Speaks:
“…our new headquarters sends a strong message…the US market is crucial… meeting our aggressive global goals VW of America will have to play its part…by 2018 we are aiming to sell 800,000 VWs and 200,000 Audis in the US per year…consumers are shifting to smaller more efficient vehicles…they want cars that are both green and attractive…we are pushing ahead with eco friendly technologies…our group is putting a lot of money and effort in the future of driving into electric cars…and yes we are technology leaders…”
Source: http://www.youtube.com/watch?v=Evl3wrryNnI
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May 3rd, 2009 (5:15 pm)#89
General Electric’s vaunted Crotonville executive management training is turning out to be far from the “Midas touch” it was assumed to be. There haven’t been any outstanding ‘graduates’ from GE, and GE is faltering as well.
May 3rd, 2009 (5:16 pm)#85 DonC
It’s not sympathy for the bondholders. It’s respect for the rule of law in this country. There is a big difference.
The question isn’t whether or not the bondholders could get DIP financing. It’s whether they could get more in a liquidation. Chrysler does have actual assets that would fetch a price in a liquidation. (Jeep, patents, licensing deals, some real estate, some cars.) It true that they would probably have to sell at a big discount. But considering that senior secured bondholders get par before anyone else gets a dime, they might reasonably expect to get more than the government is offering. And, in that case, they have every reason to complain.
Maybe you’re right. Maybe Chrysler isn’t worth anything in a liquidation. But there’s no way of knowing that until/unless there is an asset sale. We have procedures in place to handle these situations. It’s called the bankruptcy code. And, by ignoring that, the government is acting in an arbitrary manner and undermining the entire credit system of the United States. And I find that very dangerous.
By the way, if Chrysler is worth nothing in liquidation, then the UAW shouldn’t get anything either. The bondholders would still have to be minimally compensated–you can’t just take the assets without bidding on them in a 363 auction first. But the UAW’s 55% equity is a direct transfer from me, the taxpayer, to the UAW retirees. And most of us taxpayers don’t have anything even close to the health benefits that our tax money is going to supply to the UAW retirees.
The airline retirees lost their health care when the airlines went bankrupt, and so did the steel workers. What makes the UAW retirees so special? Other than the fact that their union donated a lot of money to the democratic party? However, if they are going to give them special treatment, at least do it in a way won’t undermine our entire credit system.
May 3rd, 2009 (5:24 pm)#89 Statik
I thought he was passed over for the CEO spot at GE for a reason? I didn’t know he was highly regarded at the time. Although it makes sense. Presumably, not every board of directors is incompetent.
I don’t even know why Nardelli would want a job. I mean, isn’t the 210 million dollars he got in severance from Home Depot enough? And that’s not even counting the 63 million he made in salary. It’s not like he needs to worry about paying his bills. And being a CEO is pretty much a full time job…
May 3rd, 2009 (5:51 pm)#95 LauraM said:
#89 Statik
I thought he was passed over for the CEO spot at GE for a reason? I didn’t know he was highly regarded at the time. Although it makes sense. Presumably, not every board of directors is incompetent.
I don’t even know why Nardelli would want a job. I mean, isn’t the 210 million dollars he got in severance from Home Depot enough? And that’s not even counting the 63 million he made in salary. It’s not like he needs to worry about paying his bills. And being a CEO is pretty much a full time job…
=======================
Yeah, he was eventually passed over…but as I recall it was a three way race with him, McNerney (now CEO of Boeing) and of course Immelt. I assume he was fairly highly regarded because they refered to him in the same vein as Welch for quite a while.
As I recall he was going to takeover when Welch reitred, but it didn’t happen and when it didn’t. Welch sat him down and ‘let him go’ and the guy who backed/financed Home Depot to greatness, and also was on the BoD of GE and gave him a offer to come work at HD on the spot…before he even got up from the table at GE.
He actually did fairly well at HD before he was CEO, he is a bean counting, high efficiency kind of guy, and HD operated like a wild child….but he knew nothing about home improvement retail (or selling any product, lol), and was out of his element and totally lost when he took over. (in my opinion)
As to why he came back? Must have just been vanity to show he could do the job…it certainly wan’t for money (as you say he made a lot of HD) and he only got paid $2 total in salary and Chrysler, while all his options stayed underwater.
May 3rd, 2009 (6:13 pm)The Chicago Mafia (aka The Obama Administration) needs to put the squeeze on GM big time. GM executives need to feel the pain. Maybe some busted knee caps are in order. GM has been making crap cars for far too long. It’s about time someone fixes this broken company now. Yes We Can !
May 3rd, 2009 (6:21 pm)Something is very fishy with this Chrysler bankruptcy deal. Originally the government’s firm offer to creditors was 22 cents on the dollar. But now suddenly the deal is 29 cents on the dollar. Where did this additional 7 cents come from ? Somebody is making extra coin on this BK deal. Who is it ? Inquiry minds want to know.
May 3rd, 2009 (6:32 pm)@95 LauraM says:
..And being a CEO is pretty much a full time job…
Say What ? Not in America. They spend most of their time at the golf country clubs, Hooters and the rest constantly checking the current value of their stock options via iPhone.
This is why our country is in a shambles. The CEOs only care about themselves, are constantly on the move to avoid any accountability, make horrendous decisions and escape with golden parachutes.
The CEOs caused most of the mess we are in today. The other major cause is failure of government regulators to do their jobs.
May 3rd, 2009 (6:45 pm)#98 Denmark said:
Something is very fishy with this Chrysler bankruptcy deal. Originally the government’s firm offer to creditors was 22 cents on the dollar. But now suddenly the deal is 29 cents on the dollar. Where did this additional 7 cents come from ? Somebody is making extra coin on this BK deal. Who is it ? Inquiry minds want to know.
===================
Just as FYI/interesting side note:
It actually went to 32 cents on the dollar (they upped it 250 million, to 2.25 billion), 2 hours before the deadline to ‘sweeten’ the deal…which obviously was another lead balloon, as it fell flat.
(no mentioning the Mythbuster’s foil dirigible please…although it was pretty cool, lol)
May 3rd, 2009 (7:21 pm)#96 statik says of Home Depot pre-Nardelli and HD operated like a wild child…
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Yes, an extremely successful wild child both for customers and as a competitor. Then came Nardelli and the whole culture of the company went downhill, along with the quality of store operations. As everyone in every store spent their time and energy looking at the corporate home office in Atlanta, sayin yes sir no sir to Mr Nardelli, no one had time any more for customers or running the stores….
May 3rd, 2009 (8:46 pm)Laura M, DonC, Statik, etc
Didn’t the goverment go to the head of the line when they loaned money to GM & Chrysler? They also were up front about the terms of those loans? Didn’t those terms include viability plans that included concessions by all parties, including the bondholders? It seems to me that the bondholders passively accepted those terms by not legally objecting to the terms and the loans at that time, thereby forcing bankruptcy around that time.
Does it matter anyway? For the company to arise out of bankruptcy doesn’t the court need to be convinced of the operational viability so as not to irresponsably risk the remaining assets? DIP financing alone will not demonstrate this. A partnership with Fiat could help and the pre-bankruptcy concessions will help. The judge will have to determine if these and the other reorganizational moves are enough but it seems like an uphill battle.
May 3rd, 2009 (9:27 pm)#77 Lurtz,
“A hundred years ago you guys would have been top-hat-and-tails cigar-smoking Steel-age barons in private clubs. Now you’re just guys wearing discount-store clothing with bad hair typing angry screeds online. (From your imaginary mansions in the Hamptons, no doubt.)”
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I say! Easy there my good man. I almost popped my monocle out upon receiving your communique. No reason to get your knickers in a knot. Just a little venting of the gall among wiseacres whilst Chrysler feels the pinch of the game, don’t you know?
May 3rd, 2009 (9:32 pm)#102 koz said:
Laura M, DonC, Statik, etc
Didn’t the goverment go to the head of the line when they loaned money to GM & Chrysler? They also were up front about the terms of those loans? Didn’t those terms include viability plans that included concessions by all parties, including the bondholders? It seems to me that the bondholders passively accepted those terms by not legally objecting to the terms and the loans at that time, thereby forcing bankruptcy around that time.
Does it matter anyway? For the company to arise out of bankruptcy doesn’t the court need to be convinced of the operational viability so as not to irresponsably risk the remaining assets? DIP financing alone will not demonstrate this. A partnership with Fiat could help and the pre-bankruptcy concessions will help. The judge will have to determine if these and the other reorganizational moves are enough but it seems like an uphill battle.
————————
Bullet style:
nope
no
no sir & especially not them
no they did not
it does
nope
doubtful
…and not in this particular case
Now that LauraM is around, I’m sure she will expand on your questions…and I can just go to bed early.
A/S/L?
(=
Related side note (to #77 Lurtz): My wife doesn’t let me smoke cigars indoors, or wear a top hat at the dinner table…but the tails are fine for any occasion.
May 3rd, 2009 (10:05 pm)Me #102
“Didn’t those terms include viability plans that included concessions by all parties, including the bondholders?”
Statik #104
“no sir & especially not them”
Oops…I meant to write:
…concession PLANS by all…
It’s the understanding of the intent of the loans that matters, IMO.
I never saw anything as to WHY the government’s loan was at the head of the creditor line, but I know I read that on more one occasion. In fact, I thought you included something like that in your comments from back at the time of the loans.
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“It seems to me that the bondholders passively accepted those terms by not legally objecting to the terms and the loans at that time, thereby forcing bankruptcy around that time.”
“no they did not”
Another poor conveyance on my part. It should have read:
It seems to me that the bondholders passively accepted those terms by not legally objecting to the terms and the loans at that time, which would have forced bankruptcy around that time if the loans were blocked.
I assume you mean that you believe they did not accept in a legal sense. They certainly did in reality.
.
May 3rd, 2009 (11:27 pm)Have any of you seen this?
http://news.yahoo.com/s/ap/20090504/ap_on_re_us/eu_italy_fiat_gm;_ylt=AjbBrO0DM59r24jSrWFCS_bBF4l4;_ylu=X3oDMTJqam5jaXZiBGFzc2V0A2FwLzIwMDkwNTA0L2V1X2l0YWx5X2ZpYXRfZ20EY3BvcwMxBHBvcwMxBHNlYwN5bl90b3Bfc3RvcmllcwRzbGsDZmlhdGV5ZXNuZXdj
Now is looks like Fiat is also going to buy the European GM divisions. I guess they can afford it, since they are getting Chrysler for free. I always new that I would end up with a Ferrari someday! I can just see it now, tooling around the highways and by-ways in my Ferrari Agila.
http://www.opel-europe.com/agila2008/
Lurtz #77: Wow! I have never been called an eliminationist class-warrior before. Something new I can add to my list of “sticks and stones”. OK, you got me on the discount clothing – It is a weekend after all. But I am rather proud of my hair!!! And my spring mansion is in Youngstown, OH, because the weather is much nicer this time of year….
And by the way, the orbital velocity of Mars is 11,000 miles per hour, or if you like the metric system, 24.1309 km/sec.
Till tomorrow’s thread
May 4th, 2009 (12:12 am)#102 Koz
I’ll try to take a stab this. Although, I’m really not an expert in bankruptcy law.
But this is my basic understanding of the situation (and Statik please correct me if I’m wrong):
When the government loaned money to GM and Chrysler, Chrysler’s assets were already mortgaged. That meant the government had to take a junior position. So, in a bankruptcy proceeding, the bondholders get priority over the government. GM, on the other hand, had unencumbered assets, so the government’s loan is secured. And the government will take priority over the bondholders in a bankruptcy proceeding.
(It’s more complicated than that–some of GM’s bonds are secured, but the assets involved are of questionable value–Saturn, which they’re already giving away for free, and a plant they would probably like to keep, but is very politically expendable.)
Second, a bondholder cannot object to GM or Chrysler getting new loan any more than JP Morgan could object to someone getting a second mortgage on their house from Bank of America.
And if BAC issued the mortgage on the condition that JP Morgan lower the first one, that would be between the homeowner and BAC. JP Morgan would have nothing to do with it. And if BAC foreclosed, they’d still have to pay off JP Morgan since that’s the first mortgage. Similarly, GM and Chrysler’s loan from the government is between them and the government. The bondholders have no standing to object to any of it. But they certainly aren’t required to meet the government’s requirements of GM or Chrysler.
Also, as long as GM or Chrysler are current with their payments, the bondholders cannot force GM into bankruptcy. Any more than a bank can foreclose on people who are currently up-to-date with their mortage payments. Even if they start borrowing heavily on their credit cards.
I’m not sure I understand the rest of your question. Yes. It matters because in a reorganization, every creditor is entitled to receive at least the value they would get in a liquidation. If a group can prove that they would do better in a liquidation than a reorganization, then they can force a liquidation. The judge is allowed to make a judgment on the liquidation value, but that’s a long process, and certainly would take more than the allotted 30-60 days.
There is something called a “cram down” where the 2/3rds of the bondholders of a given priority level can drag the rest with them. However, the bondholders votes have to be given in “good faith,” and the tarp lenders probably shouldn’t qualify, which renders everything a lot more complicated.
May 4th, 2009 (6:40 am)Laura M #107
Thank you for the thoughtful response. Your BAC and JP example is a good one but not completely congruous. I suppose the argument I’m presenting is what if I went to BAC and said I cannot operate for the next 2 months please gimme some cash and the loan in question is not on realestate but a depreciable asset. BAC comes back and says well I might be willing to do that but come back with a plan that shows how you will be able to operate in the future. Part of the plan I come back with says that I will reduce my debt to JP by 2/3 among other things. BAC says it sounds like you might onto something but you have to do this in 3 months time and prove viability then or I’m calling back my loan to you. Does JP have no legal right to say WOAA, these guys are not in a position to pay me back now and they are basically negioting away my position without my say or delaying a bankruptcy while the value of my sercurity deminishes. So, the litigation would not have been to force bankruptcy but rather to block two parties from conspiring to negotiate away JP’s bond value. I suppose JP will have to be shown to be suffiently aware of the terms of the loan, even if this is a valid legal argument.
My question, “Does it matter any way?” is just addressing the issue that all of the discussion about what everyone will end up with is based on the presumption that something will rise out of bankruptcy. If the judge chooses to liquidate then none of this matters. We would have to know a lot more detail for informed speculation but it certainly seems plausible, if not likely, that this process will lead to Ch7.
May 4th, 2009 (8:13 am)87 Mark M
Nuclear is an option, but not the best option. Too expensive, non renewable, produces waste, and has inherent danger (no matter how small). It was a great 20th century solution, but should stay in the 20th century.
- – - – - – - – - – - – - – - – - – - – - – - –
The point is that by halting all that 20th century tech (nuclear power) you are forcing the power companies to use 18th century tech (coal). Nice tradeoff.
Nuclear is more expensive than coal because the coal plants have been freely polluting the air and passing all those costs on to you and me. Once coal (and other “dirty” fuel sources like oil) have to pay the actual cost of their product nuclear will be cheaper.
Coal plants produce waste. In fact, coal plant emissions include a small percentage of nuclear material (google it or http://www.epa.gov/radtown/coal-plant.html if you’re too lazy) so you’re breathing nuclear stuff right now because of a bunch of well-intentioned but misinformed people who think nuclear power plants are so bad. The joke is on the anti-nuke activists because they have CAUSED more nuclear pollution than any nuclear power plant ever could. No technology is perfect but with advances in nuclear especially in the last 10 years nuclear power is now far safer than coal or natural gas when you factor in the hidden damage those two technologies cause. And nuclear power will continue to get better (unlike coal and natural gas) as new technologies come online.
If you look at my older posts you will see that I have consistently said that nuclear power is one part of the solution, not the only. There is no “one solution.” We need a huge expansion of solar power and wind energy as well as energy from the tides and ocean currents. Hydro power accounts for about 10% of our nations power now and we should look into environmentally safe ways to expand that as well. But we need nuclear to provide base line power to most parts of the country (that don’t happen to have a huge hydro power plant nearby).
If we expand renewables enough to provide 40% of our energy needs (solar now covers about 1% IIRC) then double our nuclear power from 20% to 40% and keep the hydro at 10% we will be energy independent. That won’t happen overnight. But sticking our heads in the sand about nuclear just isn’t an option.
Reference: http://www.ornl.gov/info/ornlreview/rev26-34/text/colmain.html
and http://www.epa.gov/radtown/coal-plant.html among others.
May 4th, 2009 (9:30 am)#108 Koz
No. In that situation, JPM couldn’t do anything. But if their loan was secured, they would retain first claim to the asset in question. If not, they still couldn’t do anything about it. That’s why its in my credit card contract that they can raise my interest rates if I become a riskier bet. In the bond market (which is where GM and Chrysler are), the bondholder takes a loss on his or her bonds.
And yes, everyone assumes that something will arise from the reorganization. At least for GM, Chrysler is more questionable. GM’s assets are worth quite a lot more as a going concern than in a liquidation. Chrysler’s are too, but its continued ability to act as going concern is a lot more questionable.
May 4th, 2009 (9:57 am)All I can say is how many time are we going to see Chrysler go Chapter 11 before it closes its doors forever.
NPNS!
May 6th, 2009 (12:10 pm)#73 CDAVIS Says:
May 3rd, 2009 at 12:06 pm
Option #3:
GM is done for; don’t waste another $1 of taxpayer money on GM…shut her down and let the more lean and innovative car makers quickly fill in the resultant void.
As a taxpayer underwriting/supporting GM (involuntarily), I hereby cast my single vote for Option #2. Second in place, Option #3.
PS…way to GM-VOLT.com commenter’s! This is a particularly rich blog thread with many well reasoned and articulated points.
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The only way for Chrysler/GM to continue is if government pours money into it. This was as true last November as it is today. As statik pointed out earlier, as soon as government started to pour money into it, it had the choice of continuing to pour money into it, or stop and look foolish for pouring money in to a broken vessel (not his words, but you get the idea).
Consequently, if Chrysler/GM does survive in some form, it will be under a form of government ownership/control. As many if not most posters have noted, no one wants to buy a government-made, government-controlled product. In short, Chrysler/GM would appear doomed to fail regardless of the outcome of the GSB.
The one smart thing the government could do here is what it won’t do, and wouldn’t do last November:
It could allow Chrysler/GM to fail, with the result that many buyers with domestic loyalties move to Ford, and one healthy domestic automaker emerges out of the ruins of the Big 3. To continue on our current path of continued government meddling is to likely to condemn Ford as well as GM/Chrysler to the trash-heap of history. Unfortunately, government bureaucrats who (in most cases) have never made or designed a product or valuable good or service in lives are unlikely to be blessed with so much foresight (as evidenced by their current set of actions).
May 6th, 2009 (3:24 pm)All hail King Barack I
Destroyer of economies and rich democratic traditions.
May 6th, 2009 (4:00 pm)Lyle: Nice job fleshing out the secured v. unsecured bondholders angle. I’m still waiting to see how UAW Trust makes out v. both secured and unsecured bondholders. If you know any good corporate bankruptcy attorneys, I’d be interested in reading their take on it. Too much misinformation out there right now.