The Carmagedonn Thread: FCA and "Consolidation"

[Tornado]

I have to question Ghosn's effectiveness. Other than cutting a couple of brands, GM has already performed everything that Ghosn did for Nissan and Renault to turn them around. The main difference was that it took Ghosn a year and GM about 6.

 

[Div is back]

Umm... isn't the fact that a lot of people won't have jobs, won't be able to buy anything, so then more businesses will start to fold, more people won't have jobs, more people won't be able to buy things, and so on the reason?

The nature of the markets will determine the amount of jobs lossed and the amounts of job saved.

What your government is trying to do is stick bubble gums to cover holes on a sinking titanic. GM has failed, months if not years ago.

As for the million jobs, GM is just one of MANY automotive manufacturers in the world. The structure will be wiped away, but the tools, the factories, the workers abilities will stay and will be picked up if the private sector sees an opportunity.

 

[Tornado]

Whoever was to buy the GM brand names would likely buy the factories and tooling as well. I seriously doubt Chevrolet would be relocated to Hong Kong, for example. There would be a grace period of economic turmoil while everything was sorted out, but after that things would be fine.

 

[Keef]

I have to question Ghosn's effectiveness. Other than cutting a couple of brands, GM has already performed everything that Ghosn did for Nissan and Renault to turn them around. The main difference was that it took Ghosn a year and GM about 6.

There's one thing GM hasn't done that Nissan has. Make money. There's also something that GM has that Nissan doesn't. The burden of union overhead.

 

[Philly]

The only thing that'll really help GM it seems is money, whether that is in the form of decreased expenses or cash aid. Product innovation won't do a thing because GM will have collapsed before there is any hope of anything new hitting the market.

GM is NOT the industrial backbone to the US economy. They are the industrial backbone to Michigan's economy. I really do understand that the end result of GM failing would be extremely detrimental to MICHIGAN. But when it really comes down to it, that isn't my fault, and I shouldn't have to pay for it.

...

The highest grossing casino in the US makes more money than GM does. If they start to fail, should we bail them out too?

If GM failed and the entire state of Michigan went unemployed, that's still a huge burden on everything else. The government would still have to drag all those people around on welfare and things. And then the situation here would probably bring down other areas of the country. So in the end, it may be cheaper for you to save GM than not. But what do I know, I'm no expert economist.

Profits aren't what is going to decide which companies have the biggest impact. Casinos wouldn't put nearly as many people out of work if they failed.

 

[Joey D]

If GM fails, the entire world economy will take a pretty good hit. You have to remember everything that relies on it. Time had a good article today entitled "Is GM Worth Saving?". While I don't really support government bailouts for corporations, I also have to think realistically about what would happen if GM went under. It's not just Michigan's economy either, there is much more than that.

Is General Motors Worth Saving?

For months, General Motors had been telling everyone who would listen that bankruptcy was not an option. It had a $30 billion cash pile and plans to restructure the company as the economy rebounded and 2007 U.S. auto sales topped 16 million units.

Then came October. Sales plummeted an astounding 45% over the same period last year, a result of a slowing economy and a dearth of financing for would-be car buyers. Total U.S. car and light-truck sales this year could come in at 13.5 million, 2.6 million fewer than last year. "That's in nobody's business plan," says Kimberly Rodriguez, an automotive specialist with Grant Thornton. "The best planning in the world cannot survive that fluctuation." It's now clear that GM can't survive as an ongoing entity without massive federal assistance. The company is burning through more than $2 billion each month. It has $16 billion left. As if they were aboard a dirigible losing altitude, GM's bosses have been frantically throwing all manner of stuff overboard — retiree health-care benefits, people, assets, new car design — to conserve $5 billion. That will get it through the year. (See pictures of the 50 worst cars of all time.)

But 2009 is the year of reckoning for GM and the rest of the domestic auto industry, if not the economy as a whole. The GM crisis is raising once again the issue of how far the government should go in rescuing banks, insurance companies, mortgage holders, credit-card issuers and now carmakers. GM has no doubts about it. "Immediate federal funding is essential in order for the U.S. automotive industry to weather this downturn," GM president Fritz Henderson admitted to investors during a conference call in which GM announced a third-quarter loss of $2.5 billion.

No one is more aware of that need than Barack Obama, who carried Michigan by a huge margin. The President-elect is committed to helping the Detroit Three, and House Speaker Nancy Pelosi is leading a rescue party that plans to get a bailout bill in front of President Bush before Thanksgiving. So far, the President has offered only to speed through Congress an already approved $25 billion loan to help Detroit create new fuel-efficient models. But GM needs an additional $10 billion simply to pay its bills next year and $15 billion more to close plants, compensate redundant workers and dump some of its lesser-performing brands.

The issue boils down to a historic proposition: Is what's good for GM still good for the country?

"If GM were to go into a free-fall bankruptcy and didn't pay its trade debts, then the entire domestic auto industry shuts down," says Rodriguez. The system — the domestic auto plants and their interconnected group of suppliers — is far bigger than GM. It includes 54 North American manufacturing plants and at least 4,000 so-called Tier 1 suppliers — firms that feed parts and subassemblies directly to those plants. That includes mom-and-pop outfits but also a dozen or so large companies such as Lear, Johnson Controls and GM's former captive Delphi. Beyond those are thousands of the suppliers' suppliers.

Although the Detroit Three directly employed about 240,000 people last year, according to the industry-allied Center for Automotive Research (CAR) in Ann Arbor, Mich., the multiplier effect is large, which is typical in manufacturing. Throw in the partsmakers and other suppliers, and you have an additional 974,000 jobs. Together, says CAR, these 1.2 million workers spend enough to keep 1.7 million more people employed. That gets you to 2.9 million jobs tied to the Detroit Three, and even if you discount the figures because of CAR's allegiance, it's a big number. Shut down Detroit, and the national unemployment rate heads toward 10% in a hurry. (See Pictures of the Week.)

Even if just one of the Detroit Three — and GM is the most likely, as Ford is in better shape and Chrysler is much smaller — spiraled into a free-fall bankruptcy, the systemic effects, at least initially, would be huge. The whole industry would not be able to build cars in the U.S., because of the lack of parts. "Unlike the airlines or steel, when you look at the automobile industry and the fact that the whole supplier base is connected — to Ford, Chrysler, Toyota — it will have a ripple effect on the entire industry," says Nicole Y. Lamb-Hale, a bankruptcy expert at the Detroit office of Foley & Lardner, a law firm that represents some GM suppliers.

A carefully planned, prepackaged bankruptcy would still be troublesome, she says. Throwing 479,000 GM retirees onto the rolls of the Pension Benefit Guaranty Corp., for instance, could overwhelm it. And GM's agreement to fund the United Auto Workers' voluntary employee beneficiary association (VEBA) — thus getting a $50 billion unfunded liability off its books — might then be in jeopardy, as would the union's health benefits. The VEBA has already saved GM nearly $5 billion in the past quarter, and still greater benefits lie ahead.

A bailout won't spare GM or its workers pain. Assuming the government bridges GM to the future — or provides debtor-in-possession financing in a bankruptcy — there is still a ton of restructuring to do. The company operates 21 plants in North America and has three more that are scheduled to close. But Grant Thornton's Rodriguez says that still leaves five to go to match demand. "They still need to take structural steps: reduce suppliers, reduce the number of plants, reduce the cost structure and get rid of excessive debt." Most analysts say GM has to dump underperforming brands too.

Shutting down plants and cutting labor are costly — it's one of the ironies of the auto business. Deutsche Bank estimates that GM would have to spend $12 billion to chop labor costs and compensate dealers who lose their franchises. That would lower GM's North American operating costs from the current $31 billion to $25 billion annually, says Deutsche Bank. (See pictures of the global financial crisis.)

None of this can happen without the cooperation of the UAW, which is probably feeling better knowing that Obama is on his way to Washington. Although it hasn't shown its hand, the UAW may try to mitigate job losses in the U.S. by pushing GM and Ford to build fewer vehicles in Mexico, according to Sean McAlinden, chief economist at CAR. Obama might be sympathetic to that argument; he said during the campaign that NAFTA needed to be re-examined. The carrot for GM is that any new workers it hires in the U.S. will make $13 to $14 an hour and collect limited benefits rather than work for $29 an hour and get full benefits — the old UAW wage.

There's also a legitimate question as to who would do the restructuring. GM CEO Rick Wagoner has made the case that his crew is best placed to run the turnaround since it knows where the cost buttons are. But critics like Jim Schrager at the University of Chicago Booth School of Business say the wrong people are in charge: "I think you would only put money in GM if you had a complete change in the board and the current management. They are diligent. They worked very hard, but it just hasn't worked." In Schrager's view, GM is a strategic failure. It can manufacture high-quality cars, but it neither makes the right kind nor markets them effectively. He'd bust the company up into three independent firms: Chevy, Buick-Pontiac-GMC and Cadillac-Saab-Saturn.

If that's ultimately where Detroit ends up, is it worth the price to get there? Put another way, does GM deserve to be bailed out or left at the mercy of the market and almost certain death? "The University of Chicago training in me says the market should prevail," says Schrager. "But the Chrysler bailout was a success, and, gosh, I'd love to save it." That sentiment is not shared by everyone, and it goes to the heart of the central economic debate facing the country — between hard-nosed capitalists, who believe the market should decide, and public-policy types who view the economy as something far more organic than a balance sheet. But ultimately, whether GM is dead or alive, the taxpayers are on the hook for billions, for everything from lost tax revenues to higher unemployment costs to taking over GM's pension obligations. The decision that Washington has to make is whether we pay for GM's survival or for its funeral.

Source: http://www.time.com/time/business/article/0,8599,1858702-1,00.html

The American public will take the hit no matter what happens to GM. If we bail them out, we get nicked with a tax increase (possibly), if we don't bail them out then we are going to have to help hundreds of thousands of people who no longer have any money. It's sort of a damned if we do and damned if we don't. Like I said I support bailing out GM, but I think the money should be closely monitored.

 

[YSSMAN]

Goshn would be an interesting choice, but I'd rather have someone like Lutz at the helm. Thats just me. The bean counters, whoever they may be (post-Chapter 11 GM, the Fed, New Owners), likely wouldn't let someone like him run the company. That would have been like DeLorean taking over all of GM, it wouldn't have worked well. A balance of business and passion has to be found, and as I'm thinking of it, I'm otherwise drawing a blank as to who would be best. Jim Press is a great guy, but Chrysler has him under lock-and-key. Some of the Germans would be an interesting choice, but I get the feeling that much of GM would otherwise cease to be.

As for the supplier question, its a very interesting discussion that has been left out of the job loss equation. I'd be very interested to see how those numbers work out when they're added on. I don't think they (other manufacturers) could fill the void left by GM, but I may be wrong.

...Then you've got to factor in the unemployment payments, the added requests for welfare checks, etc...

Hooray!

 

[V1P3R]

I think the money should be closely monitored.

You'd think so... but, look at AIG.

 

[Sniffs]

first off, people
we'll cross that bridge when we come to it

we made the car common, we are about to lose the privilege of having them new.

you people have also forgotten that anything not "the American Way", here, is considered COMMUNISIM!
this comes from being paranoid for over fifty years because of nuclear cloud hanging over american heads...excuse me, US heads.

the monetary mistakes, as far as I'm concerned, were tying everything to the US housing market, and "bubble"ing oil. Sending oil prices through the roof may be listed as one of the causes of Great Depression II.

 

[Joey D]

I'm pretty sure we are at that bridge and we need to cross it in some way. GM probably has at most 100 days of operating cash, at least that's what friends and family tell me.

 

[buickgnx88]

Well actually if GM keeps Hummer, they won't need to cross any bridges!

 

[Div is back]

Politically:
GWB will not act upon GM. Obama gets in January 20th/21st (?), can GM last that long?

Economically:
GM is not the backbone of the US economy, GM is a link in a huge chain in the automotive industry, one can argue the importance, but it is still ONE link. That link can be replaced, I cannot emphasize this enough. If GM goes down, the only thing that goes down is their overpaid staff and their 1960's management group. The tools, the factories, the workers abilities, everything stays and is in place for a restructuration by many private companies or a takeover by a major player in the automotive industry.

I hope GM will go down, it is the prime example of mismanagement.

 

[TheCracker]

I think Bush will have to do something about the GM situation. If he leaves it for Obama to sort out, or not sort out, he'll be remembered as the president who let GM go to the dogs.

The tools, the factories, the workers abilities, everything stays and is in place for a restructuration by many private companies or a takeover by a major player in the automotive industry.

I hope GM will go down, it is the prime example of mismanagement.

That's fine and dandy as long as someone actually wants GM. As it stands and in this climate, is it such a tempting acquisition?

 

[Div is back]

Nobody wants GM, everyone wants the power behind it.

 

[TheCracker]

Nobody wants GM, everyone wants the power behind it.

By power i presume you mean their standing in the market?

If they are allowed to be taken out of that market, for any length of time, their space will soon be taken up by their competitors. It will then be much harder for anyone who has taken them over to get a foot hold back into that market.

 

[///M-Spec]

I think certain portions of GM are worth saving, but not the whole thing. Cadillac, Chevrolet, possibly Holden and Opel, not to mention the Corvette name are all stand-outs in a sea of meh.

Even with my politics, I can see stomaching a bailout, so long as it is for the portions of GM worth saving. (It is supposed to be structured as loans, after all, not free money.) The problem is we are presented with an all or nothing proposition by the GM management and it's simply not worth it. It would be throwing good money, something already in short supply these days, after bad money.

I think it's definately possible that a liquidation of GM would actually, in the long run, save the US auto industry. I have no doubts there are smart, talented and dedicated people at GM. They deserve a chance to be cut free from the rest of the no-talent ass clowns that have been holding them back.

A flock of vultures picking over GM's bones, as long as they were smart vultures, can actually pick and choose between the parts worth saving and the parts best left for rodents and microbes. As another poster already stated, the people, plants, tooling and machines aren't going anywhere very soon. If they are picked up and integrated into existing companies or a brand new company created from GM ashes, there may be some turmoil for a while, but things could come back much stronger than ever.

I say that given a choice between the market (and certain death for GM) and intervention as currently proposed, I'm leaning towards the market. But with the Dems running the show, I think GM will get pretty much what they want, which would be a travesty.


M

 

[Philly]

Goshn would be an interesting choice, but I'd rather have someone like Lutz at the helm. Thats just me. The bean counters, whoever they may be (post-Chapter 11 GM, the Fed, New Owners), likely wouldn't let someone like him run the company. That would have been like DeLorean taking over all of GM, it wouldn't have worked well. A balance of business and passion has to be found, and as I'm thinking of it, I'm otherwise drawing a blank as to who would be best. Jim Press is a great guy, but Chrysler has him under lock-and-key. Some of the Germans would be an interesting choice, but I get the feeling that much of GM would otherwise cease to be.

The New York Times is saying Steve Jobs should come in and help out. Granted that what GM is really going to need is somebody who could step in and teach everybody how to run a company, not so much what they need to put out on showroom floors.

Well actually if GM keeps Hummer, they won't need to cross any bridges!

Nor will there be a GM that needs to get across them in the first place...

 

[YSSMAN]

I'm pretty sure we are at that bridge and we need to cross it in some way. GM probably has at most 100 days of operating cash, at least that's what friends and family tell me.

I haven't heard much from my family that works at GM, or Ford for that matter. We don't see eachother on a regular basis, but usually some word gets passed down to me from my Grandparents. Either way, its an uneasy feeling in the family knowing that quite a few of us could be out of a job within the next six months.

RE: Saving Parts Of GM

I think this will likely end up being the case. If GM is able to file for Chapter 11, my guess is that they're going to shed HUMMER, GMC and possibly Saab almost immediately. More than likely, their product foci will go mainly toward Chevrolet, Buick and Cadillac. Foreign assets will likely remain, but I'm under the impression that much of their product line will be rolled into the American ones, or vice-versa, to cut costs. If GM gets a chunk of cash from the Fed, I can see much the same happening, but I'm not completely sure.

If, God forbid, GM is forced to do Chapter 7... I have no idea what would happen.

GM essentially needs to identify whats worth saving before they go any further. To make it simple, I'll do it:

- Gamma: Corsa
- Delta II: Cruze/Astra --> Zafira/Orlando (?)
- Kappa: Sky/GT
- Epsilon II: Insignia/LaCrosse --> 9-3 (?)
- Simga II: CTS
- Y Body: Corvette
- Zeta: Camaro/Commodore
- Theta: Antara/VUE --> SRX (?)
- Lambda: Envicta
- GMT900: Silverado

Pick and choose what you like for the Chevrolet, Buick and Cadillac brands (Opel and Holden internationally)... We've got a company that can stay afloat. In theory.

 

[Tornado]

More than likely, their product foci will go mainly toward Chevrolet, Buick and Cadillac.

I don't see that. I see (if they do have to trim their brands down to three) Chevrolet, Saturn and Cadillac. Ignoring Hummer, I'm guessing Buick and GMC would be the first ones on the chopping block. Especially since they usually share dealerships.

- Gamma: Corsa
- Delta II: Cruze/Astra --> Zafira/Orlando (?)
- Kappa: Sky/GT
- Epsilon II: Insignia/LaCrosse --> 9-3 (?)
- Simga II: CTS
- Y Body: Corvette
- Zeta: Camaro/Commodore
- Theta: Antara/VUE --> SRX (?)
- Lambda: Envicta
- GMT900: Silverado

I wouldn't even save the Lambda.

 

[Joey D]

Politically:
GWB will not act upon GM. Obama gets in January 20th/21st (?), can GM last that long?

Economically:
GM is not the backbone of the US economy, GM is a link in a huge chain in the automotive industry, one can argue the importance, but it is still ONE link. That link can be replaced, I cannot emphasize this enough. If GM goes down, the only thing that goes down is their overpaid staff and their 1960's management group. The tools, the factories, the workers abilities, everything stays and is in place for a restructuration by many private companies or a takeover by a major player in the automotive industry.

I hope GM will go down, it is the prime example of mismanagement.

There are hundreds of suppliers that count on GM's business, not to mention finance firms, shipping companies, etc. While GM isn't America's economy it's a substantial part of it. If it fails then every US citizen will feel it's affects. If GM goes under you'll probably see close to a million people out of work.

 

[Omnis]

the monetary mistakes, as far as I'm concerned, were tying everything to the US housing market, and "bubble"ing oil. Sending oil prices through the roof may be listed as one of the causes of Great Depression II.

Oil prices have remained the same since the 30s... when priced in gold. That means it's a dollar problem.

I hope GM will go down, it is the prime example of mismanagement.

Absolutely. K-mart probably employed more people than GM and they went out of business and the world didn't explode.

 

[Joey D]

Absolutely. K-mart probably employed more people than GM and they went out of business and the world didn't explode.

Except most of K-mart's suppliers sold to other places and felt the impact but kept going. There are several suppliers that have GM as their primary contractor. Not to mention GMAC and everyone who has financing through them. There are also thousands of dealers too that would have to close up shop. Letting GM go belly up would be disastrous for the US, if you believe otherwise you are certainly not being realistic.

GM is a Mess but We Still Need to Bail GM out Now

Since 2007, GM has lost 90% of its total value and it dropped by 25% alone just yesterday (Nov 10 08) and it is now trading at its lowest price ever and edging closer to $0. As part of GM’s aggregate cost savings plan to try stay in business, it has terminated 3,600 jobs effective immediately and has halted R&D expenditure completely. In addition, it has also stopped contributions to pension funds. Implicit costs at GM are now also skyrocketing. GM is inefficiently utilizing resources to maintain the company, including by paying fees to attorneys and lobbyists, instead of using resources towards the effort of further developing the company. GM is continuing to burn cash, it can’t get credit as a direct result of the credit crisis, and I would expect it to run out of cash completely by March 09 assuming it doesn’t get bailed out.

GM needs to cut costs and move vehicles, but the question now is: why would you consider buying a GM vehicle? No rational buyer should buy a GM car right now. The company is too volatile and it is no longer an innovator because it has discontinued R&D expenditure therefore quality will further diminish. Also, how will a company that goes under service your vehicle?

However, the problem is GM is too big to fail. It can’t fail. People argue that if companies make bad investment decisions, they should be held accountable (and I agree), but people don’t realize GM is just too big to fail. If it does, everyone will suffer. To put GM failing into perspective, in 1998 during a GM strike that lasted for 3 months, the aggregate US GDP dropped by 1/3rd. Think about that, it’s huge, and if GM now goes under completely, the consequences will be profound as it employees close to 266,000 people and about 1,000,000 people would be directly affected with their jobs. And lets not forget the ripple effects where suppliers and other stakeholders would also lose business and also layoff yet more people. Where will all these people find work, what about pension beneficiaries? The costs are just too great for GM to fail.

The government needs to bail GM out, and I think it’s going to happen. The Obama camp hinted it would give GM money during the campaign, though there is no other indication as of yet. If GM acquired Chrysler about a week ago, at least, it would have gave GM more time (about a year) to reorganize as Chrysler has $11 billion in cash. Some would argue that would just be avoiding the inevitable because GM still wouldn’t produce quality vehicles and cut costs. However, a GM/Chrysler merger just isn’t likely anymore and the truth is that GM needs $11 billion in new working capital now otherwise it will run out of cash completely by March 09 and it will go under where we would all be adversely affected. If GM gets this money, I hope it learns its lesson and restructures management, cuts costs, and produces quality vehicles, than maybe, it can get out of this mess.

So, what do you think? If GM was bailed out, could it survive? Will it change? Is it too late, or do they simply not desrve to be bailed out? Do you think its just too big to fail?

Source: http://business2press.com/2008/11/11/gm-is-a-mess-but-we-still-need-to-bail-gm-out-now/

Look I understand there are a lot of GM haters out there, I don't particularly like them either, but really are so many of you so blind to what will happen if they go bankrupt? No the world won't stop, but in an already shaky economy this will be a huge blow and everything will be felt world wide.

 

[Philly]

I don't see that. I see (if they do have to trim their brands down to three) Chevrolet, Saturn and Cadillac. Ignoring Hummer, I'm guessing Buick and GMC would be the first ones on the chopping block. Especially since they usually share dealerships.

Surely that would mean Pontiac too? I haven't seen them mentioned in either the "to keep" or "to sell" lists...

Oil prices have remained the same since the 30s... when priced in gold. That means it's a dollar problem.

Surely the dollar hasn't doubled in value in the last 3 months...

Except most of K-mart's suppliers sold to other places and felt the impact but kept going. There are several suppliers that have GM as their primary contractor. Not to mention GMAC and everyone who has financing through them. There are also thousands of dealers too that would have to close up shop. Letting GM go belly up would be disastrous for the US, if you believe otherwise you are certainly not being realistic.

GMAC could probably be dealt with. Chrysler was interested I believe on the grounds that the payoffs would be huge when the economy turned around. I think somebody would be willing to take it over.

On that note also, do most GM buyers not lease? Because GM should still be riding pretty high with all the payments they must be getting in from people who leased before the market went downhill.

 

[Tornado]

Surely that would mean Pontiac too? I haven't seen them mentioned in either the "to keep" or "to sell" lists...

I think it would go in this order:

1. GM sells (or kills) off Hummer.
2. GM mercy-kills Buick.
3. GM sells off Saab.
4. GM kills off Pontiac.
   
5. GM kills off GMC.*

Saturn could be repositioned as a North American arm of Opel and completely eliminate all costs associated with development by doing so. This also cuts down on patently obvious rebadges (which is the case with much of the Pontiac range). The only sad loss in killing off Pontiac would be the death of the Vibe, which could just as easily be rebadged as a Saturn. In addition, Saturn sales are very quickly moving in on Pontiac's (Saturn as a brand has taken the smallest hit in North American sales by far in the GM family), and it would be a lot harder to reposition Pontiac under a three brand strategy than Saturn (Pontiac being known for rebadging Chevrolets, which is something Saturn has only done a couple of times and only quite recently). The problem is that Pontiac is too similar (and most consumers know this) to Chevrolet, and really can't work under such a dramatic restructuring.



* Depends on how much GMC sales slide. At their current rate, GMC sales are still 33% (or so) higher than Pontiac's, meaning GMC is still the second best selling brand in the entire GMNA portfolio. In addition, GMC sales haven't been hit as hard as Pontiac sales.
At any rate, it still makes far more sense to hold onto GMC longer than Buick, who has sold less cars overall so far than GMC has sold Sierra's alone. Even Buicks worldwide sales are less than those of GMC's American sales. The sales of the two brands are also falling at roughly the same rate, with the difference being that GMC sales are falling from a much higher level.

 

[buickgnx88]

I really think Chevy should have the bread-and-butter cars, Pontiac should be the sporty brand, and Saturn should be the entry-level brand (with of course Cadillac as the luxury sector).

 

[Delirious]

What I don't understand is that the US is 10 trillion dollars in debt, yet they want to spend more money. Then again, I havn't studied any type of economics.

Also what if places like Circuit City lays off everyone, and they want a bailout to prevent that? Starbucks; what if they go under and want a bailout?

 

[Tornado]

Those are both quite different scenarios.

 

[Omnis]

Surely the dollar hasn't doubled in value in the last 3 months...

Is this in reference to gas prices coming down? The dollar has actually undergone deflation as people have liquidated their assets-- particularly in the stock market. Combine that with Obama becoming the President-elect (a symbolic "end" to the Iraq war), and there you go.

Joey, a GM bankruptcy does not vaporize the capital structure. To me, it sounds like Detroit is ripe for fresh business, given a good environment set by the local government. GM would be well-served to claim bankruptcy and throw off its UAW stranglehold.

There is no such thing as too big to fail.

What I don't understand is that the US is 10 trillion dollars in debt, yet they want to spend more money. Then again, I havn't studied any type of economics.

Also what if places like Circuit City lays off everyone, and they want a bailout to prevent that? Starbucks; what if they go under and want a bailout?

Hey, I don't understand it either. They say the only thing worse than an economist is a professional economist. Keynesianism (aka, let's spend to get out of debt) is at its last stand.

The hypothetical you described is the moral hazard of bailouts of any kind. GM is asking for it because the banks got it, and it will continue down the line until interest rates go way up or the dollar gives up.

 

[Jim Prower]

There is a place for Buick in GM's Portfolio...

 

[Tornado]

There is a place for Buick in GM's Portfolio...

But not in their North American portfolio, which is what I was talking about.