The Carmagedonn Thread: FCA and "Consolidation"

[YSSMAN]

Well, they've already temporarily closed the new Toyota truck plant in Texas. I don't know how many jobs that idled, but I know they made a huge deal about building and opening that plant about a year or so ago.

 

[Joey D]

BREAKING: Automakers to get $15[Billion] in federal loans

It's taken two rounds of Congressional hearings, some major pride swallowing and three detailed business plans, but it looks as if the Detroit 3 will be getting the federal loans they need, though not as much they asked for. A deal was reportedly reached between Democratic leaders and the White House that will supply around $15 billion in federal loans to the struggling U.S. auto industry. While General Motors, Ford and Chrysler asked for a combined maximum of $34 billion, the $15 billion is designed to ensure they stay alive until March when the issue will be readdressed with the input of a fresh Obama administration. GM and Chrysler reportedly need around $11 billion to survive the new year, while Ford has said it would only need government aid if one of the other two went under.

We're hearing that a deal was reached between Democrats and the Bush administration late Friday after top Dem. Nancy Pelosi gave in to the White House and its position that the money should come from $25 billion in loans previously approved to help the automakers retool for energy fuel efficient vehicles, rather than drawing the aid from the $700 billion Troubled Asset Relief Fund for struggling financial institutions. In return, Pelosi is seeking a guarantee that the money would be replenished in "a matter of weeks."

Both the Senate and House of Representatives have confirmed they will be meeting on Tuesday to vote on the deal, and it's expected that strong oversight of how the loans are used, whether in the form of an individual car czar or committee, will be part of the final package.

Party on, Detroit.

Well guess it's better then nothing right?

Oh and I'm still really confused on why Chrysler is getting money, didn't Cerberus turn a profit last year? Like a substantial profit?

 

[ROAD_DOGG33J]

Why does Ford's need of money rely on what happens to GM & Chrysler?

 

[Joey D]

Why does Ford's need of money rely on what happens to GM & Chrysler?

If GM or Chrysler goes under it will destabilise the market even more so then it is now, there will be an investor panic and sell off everything. Also I have to imagine the UAW would have a part to play in it as well.

 

[Philly]

Oh and I'm still really confused on why Chrysler is getting money, didn't Cerberus turn a profit last year? Like a substantial profit?

Yeah. If Chrysler is owned by somebody, shouldn't that somebody be responsible for the company, especially if they can afford to run it?

Why does Ford's need of money rely on what happens to GM & Chrysler?

Ford might not be totally destroyed if either goes under, but if having the other two around benefits them at all, it will certainly be in Ford's best interest to be there campaigning with them.

 

[neanderthal]

im disappointed with our representatives yet again.

dont get me wrong, i get the whole jobs thing, and the secondary effect it would have on florists and teachers and barbers and delis and so on in the affected towns if the big three were shuttered.

but why are we rewarding bad management? why.
we did it with the banks, now the car makers.

what if subaru decides they need money for thier asembly plant in lafayette? do they get money too? americans would be the ones losing thier jobs.

 

[Joey D]

Do you understand that if a major company goes under the stock market will become very unstable causing a panic among investors? That would be a really bad thing and investor panic was one of the many reasons for the Great Depression. I think I would rather suffer through a government intervention now while things are still "meh" instead of one when things "royally suck". I'm not saying that one company failing is the end of the world, but you have to consider the way the media would play it and the way people would perceive it.

It's not about rewarding bad management, and you can see by the hoops Washington is making the auto companies jump though they aren't. I mean the executives have already been forced to pretty much work for free (I have no issue with that mind you) which I think is a major slap in the face to them. I still think oversight needs to happen to make sure the Big Three are going to do what they say they are. If they don't follow through with that I would say serious action needs to happen.

Really Ford is the only properly managed of the Big Three and really the only one I can see making it without major cuts. Although they still have a lot of room for improvement.

 

[YSSMAN]

but why are we rewarding bad management? why. we did it with the banks, now the car makers.

Just to point something out...

The automakers are facing a class-five "S-Storm" that goes far beyond some poor decisions made 10 or 20 years ago. The very same credit problem that we suddenly said "HERE IS ELEVENTY BILLION DOLLARS" to is very much a part of the reason why Wagoner, Mullaly and Nardeli were up there for the past two days.

I think John Stewart, among others, hit the nail on the head this week. We'll throw money, without question, at the banking industry. The people who make money off of money. And yet we stand here and twiddle our thumbs and actually consider not helping out the people who actually make something, to sell, to people. At least we asked them what they're going to do with the money, and to a greater extent, we can trust their judgment... AIG, Citi (and the like) have managed to blow it every chance they get.

In an Interesting Side Note

Chrysler has Bankruptcy Lawyers at the ready if things didn't go well. Guess they didn't need them.

 

[Casio]

Oh and I'm still really confused on why Chrysler is getting money, didn't Cerberus turn a profit last year? Like a substantial profit?

To quote Wikipedia (Bad I know)

Although Cerberus owns 80% of now troubled Chrysler Corporation, it has refused to inject cash into Chrysler, as Sen. Bob Corker pointed out at a hearing about the economic needs of the American automobile industry on December 4, 2008. In response to questioning at a hearing before the House committee on December 5, 2008 by Rep. Ginny Brown-Waite, Chrysler President and CEO Robert Nardelli said that Cerebrus' other fiduciary obligations to its other investors and investments prohibited it from injecting capital.

To be fair to Cerberus, they probably don't want to invest capital into a lost cause. Especially when they can just get it from the government for nothing.

 

[Philly]

I like how this thread pretty much fell off the map when it got moved...

Anyway...

What to do when you wanted $34 billion and Congress only gave you $15 billion? Try again, but this time go North young man. The Detroit 3 are now making a pitch to the Canadian legislature seeking an additional $6.8 billion from Canada where nearly 100,000 workers are employed in factories and dealerships bearing the Chrysler, General Motors or Ford name.

General Motors of Canada has asked for $2.4 billion in loans, Chrysler Canada Inc. is looking for $1.6 billion and Ford wants a $2 billion line of credit on "stand-by" to be used "only if the current economic crisis worsens." GM is also seeking an immediate $800 million to make it through the end of the year. The Detroit automakers are quick to point out that these amounts are proportional to the U.S. bailout requests and that they are asking for loans, not handouts.

Federal Industry Minister Tony Clement was in Washington during the recent hearings and says the Canadian government will have to review the requests before pledging any funds. He had previously confirmed that funds were set aside to help automakers in the most recent budget. Premier Dalton McGuinty also pointed out the need to balance the public's needs with the carmakers' requests: "We want to move as quickly as we can, but we don't want to move so quickly that we end up with a response that is irresponsible given the legitimate demands of taxpayers."

Um, really? Isn't that pushing it a little far?

EDIT:

This is the outline of the Congress bill. Thoughts about the government receiving shares of all three company's stocks? I think that's a pretty bold move by the democrats in Congress.

As for the "Car Czar," I seriously hope that it is somebody who understands the auto business and not a tree hugger socialist who will ruin all three of the companies because they personally are thinking "ZOMG 70 MPG STOP GLOBAL WARMING BUILD 40 BILLION PRIUS CLONES EVEN THOUGH IT'LL LOSE THEM MONEY!!!!!!!"

 

[YSSMAN]

This is the outline of the Congress bill. Thoughts about the government receiving shares of all three company's stocks? I think that's a pretty bold move by the democrats in Congress.

I wouldn't say its "extreme" by any means. They did the same thing with the banks and AIG when they bought them out, and since the respective companies are worth about $137 a piece with their current stock prices, its a method that will likely see some return... Assuming of course profitability is something that happens sometime soon.

As for the "Car Czar," I seriously hope that it is somebody who understands the auto business and not a tree hugger socialist...

I don't think you'd have too much to worry about, my hopes are that they bring Iacocca in to run it. It would be awesome.

===

STUDY: Bankruptcy for GM/Ford/Chrysler would cost 20 times as much as suggested bailout, somewhere near $700BN over two years.

I still think we've got a while on this bill procedure...

 

[Tornado]

STUDY: Bankruptcy for GM/Ford/Chrysler would cost 20 times as much as suggested bailout, somewhere near $700BN over two years.

Three problems with it:

1. Chrysler can't go bankrupt.
2. They don't take into account the need to repeatedly inject money. If GM blows through cash at the rate they are now, which, remember, is without R&D spending or the tooling changeovers for the new models in the pipeline, they will have consumed all 70 billion by next January.
   
3. Its once again implying that either Chapter 7 or Chapter 11 would cause GM's assets to cease to exist.
   

Oh, and its $70 billion, not 700 billion.

 

[Joey D]

I don't think you'd have too much to worry about, my hopes are that they bring Iacocca in to run it. It would be awesome.

I don't think Iacocca wants anything to do with this, read his book Where Have All the Leaders Gone? and see just how he feels about poor management. He's probably happier with smoking cigars and playing golf with Snoop Dogg anyways.

Its once again implying that either Chapter 7 or Chapter 11 would cause GM's assets to cease to exist.

Someone would actually need to buy those assets to make anything of it though and I don't think there are to many companies right now willing to buy out GM.

 

[Tornado]

Someone would actually need to buy those assets to make anything of it though and I don't think there are to many companies right now willing to buy out GM.

That is true. However, if they declared Chapter 11 they wouldn't need to fire everyone, and they could still work while simultaneously fixing their problems. Only if they were to declare Chapter 7 would they have to cause the $70 billion figure in unemployment to occur.
But even if GM would be forced to declare Chapter 7, we could either spend 70 billion in taxpayer money per year to keep them afloat without fixing anything (which also means spending government money that could be used elseware); or we lose $70 billion dollars per year while at the same time potentially fixing GM with the bonus of not pissing away the strength of the economy with defecit spending.
At least the $70 billion that we would lose not bailing GM out might potentially fix something.

 

[YSSMAN]

Or the Fed can buy GM for $45BN (or less)... Very nice!

[/sarcasm]

In other news...

Saturn plans, both good and bad, are up in the air. Good news is, GM may keep it. Bad news is, no one knows what they'll do with it.

My guess?

"Niche brand" just like Pontiac...

 

[Philly]

My guess?

"Niche brand" just like Pontiac...

Which doesn't seem to mean anything anymore. I'm guessing if they say it'll be a "niche" brand, that'll just mean they are going to keep it around, maybe scale it back but don't know what the hell they're gonna do with it?

 

[Tornado]

"Niche brand" just like Pontiac...

Oh, you mean like it was before GM ruined it?

 

[YSSMAN]

Presumably. Best guess is that they soldier on with just the Corsa, Astra and Zafira. Hatchbacks only, possibly with diesel options. I think they're going to take Saturn back out of the "big car" market, maybe with the exception of the VUE. I'm guessing they'll leave most of the sedan budget to Chevrolet's pretty-successful Malibu, giving most of the Insignia glory to Buick as well.

Like Clockwork!

Lee Iacoca thinks the current CEOs should stay. Oh, and little birdies want to tell us a secret. Lee Iacocca should be the "Car Czar."

 

[Tornado]

He just doesn't want them to come whining for him to take the job after they sack Wagoner.

 

[YSSMAN]

CARPOCALYPSE NOW!​

The $15 BN "bridge loan" proposal failed in the Senate. Great. Looks like it'll be a happy Christmas up here in Michigan. And Ohio. And Indiana. And Illiniois. And Missouri. Argument goes that it was due to the unwillingness of the UAW to "bend" in negotiations, or stubborn GOP Senators (depends on who you ask), but either way, it failed 52-35.

The only "good" that may come out of it would be having a "bridge loan" come out of the TARP program tomorrow. Maybe. Again, depends on who you talk to.

(BTW: Asian markets are already being hit... HARD)

We'll bail out banks and other financial institutions, but we won't help out the people who actually make something. Absolutely incredible.

 

[Joey D]

Well, we're boned.

 

[Tornado]

What can I say, other than "good." So how about we siphon off some funds from the Wall Street bill? You know, like we should have done in the first place?

 

[Sniffs]

once bit, twice shy.

Somebody tell Japan and Korea to step up production, the US just went out of the car biz.

 

[Jim Prower]

What can I say, other than "good." So how about we siphon off some funds from the Wall Street bill? You know, like we should have done in the first place?

Exactly what Bush is currently considering: a "Bridge" loan until the Democratic congress convenes.

 

[Duke]

CARPOCALYPSE NOW!​

We'll bail out banks and other financial institutions, but we won't help out the people who actually make something. Absolutely incredible.

HELLO! You DO realize that the bridge loan failed to pass the Senate because the UAW absolutely refused to consider pay cuts, right?

Watch where that finger points.

 

[Joey D]

If it hadn't been the UAW they would have found something else. Politicians are so short sighted they can't be be bothered to understand the ripple effect this will cause nation wide. It takes 2 days for the banks to get bailed out with zero questions asked when they are just as mismanaged as the auto companies, that makes no sense. Either bail them all out or none at all.

 

[Jim Prower]

For those guys, it's all about keeping their Limbaugh-listening, Liberal-fearing base happy.

 

[Duke]

If it hadn't been the UAW they would have found something else. Politicians are so short sighted they can't be be bothered to understand the ripple effect this will cause nation wide. It takes 2 days for the banks to get bailed out with zero questions asked when they are just as mismanaged as the auto companies, that makes no sense. Either bail them all out or none at all.

Wow, this is spoken like a true Michigan resident.

Yes, an auto industry failure will have a "ripple effect" nationwide. They make Chryslers in my home town.

What I think you're not understanding is the "tsunami effect" that a credit failure has on the entire economy - including the small subset of that known as the auto industry. If nobody can borrow money nobody can buy Detroit's cars.

Or houses. Or anything else that costs more than a few hundred dollars, assuming there are any retailers other than WalMart left to sell things.

 

[Swift]

LOL, yes. Let's give a loan to three companies that have an entitiy, the UAW, that refuses to make comprimises even though it will cause it's own members to loose jobs and even more money then comprimising. That's extremely stupid. This is at least half the reas the Big 3 are in the situation they are in now.

The UAW(that has almost no foothold in the foriegn auto plants in the USA) is trying to railroad everyone. Of course people would be upset about bailing out people that make 2-3 times ast much as them. Why shouldn't they? The GOP in the Senate knows this and won't shoot themselves in the OTHER foot after the loss in 2006.

For the record, I'm OK with the loan as long as it comes with logical restructering of labor and other intregal parts of the business.

 

[///M-Spec]

You guys are kidding me right?

The UAW refuses to allow a pay cut to it's members and suddenly it's the lawmakers' fault the bailout didn't happen???

You DO realize that one of the main reasons The Big Three are not competitive is because it has higher labor costs than the Japanese manufactures who are in 'right to work' states??

Stop blaming congress. You should be upset with the UAW for their short-sightedness.

The Republicans left the closed-door meetings after the UAW union refused to cut wages next year to bring them into line with their Japanese counterparts. UAW's current contract with the car makers expires in 2011.

"We were about three words away from a deal," said Republican Sen Bob Corker. "We solved everything substantively and about three words keep us from reaching a conclusion."

Source: http://news.bbc.co.uk/2/hi/business/7778830.stm

Senate Minority Leader Mitch McConnell said the sticking point was the United Auto Workers' refusal to set a "date certain" to put employees at U.S. auto manufacturers at "parity pay" with U.S. employees at foreign automakers in the United States.

Currently, analysts estimate the union workers at U.S. automakers make about $3 to $4 per hour more than the non-union U.S. employees of foreign automakers like Toyota and Honda, according to the Center for Automotive Research.

Source: http://edition.cnn.com/2008/US/12/11/auto.bailout/index.html

Hmm. Take a pay cut and stay working.... or refuse and be out of a job.

No sympathy from me. None.

We'll bail out banks and other financial institutions, but we won't help out the people who actually make something. Absolutely incredible.

I strongly dislike having to bail out any company. Believe me, I'm ticked off at the banks too. But if you should realize that banking and finance has a MUCH more powerful effect on the US economy than manufacturing. Almost NOTHING happens without properly functioning banking institutions.


M