An idea for the auto bailout - DPChallenge Forums

12/03/2008 03:05:23 PM · #76

Originally posted by pamelasue:

Hey there Daryl, why don't you come and visit the Motor City and I'll take you on a tour ... I'll introduce you to some of the people (my friends and family) that would be out of work if GM were to go under. Maybe you can visit their house, while it's still their house .. because if GM fails and they lose their jobs they don't stand a snowball's chance in hell of finding any other kind of employment in Michigan. That would mean that they would get foreclosed on and either have to leave the state or take up with friends/family ... how would you like to start over after 25 years employment at one company? Do you know what it would be like to have the rug pulled out from under your feet?

Putting a human face on a failing company doesn't mean letting it fail is not still the right answer. It just makes it harder...

Leica 35mm f/1.4 Summilux M Aspherical MF - Black

12/03/2008 03:09:32 PM · #77

Originally posted by pamelasue:

Originally posted by LoudDog:
Quit drinking the D3 kool aid. 3,000,000 people will not lose their job if the big three fail. Plus, I highly doubt all three will fail. Probably just GM.

Failed business plan: //finance.yahoo.com/q/bs?s=GM&annual
Net tangible assets for GM (total of what they have minus what they owe):
Dec 2005 $10,258,000,000
Dec 2006 NEGATIVE $6,559,000,000
Dec 2007 NEGATIVE $38,160,000,000
June 2008 NEGATIVE $58,040,000,000 (you have to click over to quarterly to get this number)
Any guesses for December 2008???

When a company loses $68 billion dollars over the course of three years (actually three really bad months shy of three years) I call it a failed business plan. And on the streak they are on, I can't see how 10, 20 or 30 billion will keep GM afloat very long. Thus, taxpayer money to them in the form of a loan will simply disappear when they go belly up.

I'm well schooled on supply and demand. When GM is gone people will still need cars and people will still have to build cars. Loss of supply does not reduce demand. GM's market share will simply move to the surviving companies. Yeah, some will go to the J3, but it could be a good little boost for Ford and Chrysler.

But, if you think GM is such a great company and is just going through rough times, thus deserving of a government loan (because no one else will loan them any more money), buy their stock. At $4.75 a share you can make a killing if they bounce back.

Hey there Daryl, why don't you come and visit the Motor City and I'll take you on a tour ... I'll introduce you to some of the people (my friends and family) that would be out of work if GM were to go under. Maybe you can visit their house, while it's still their house .. because if GM fails and they lose their jobs they don't stand a snowball's chance in hell of finding any other kind of employment in Michigan. That would mean that they would get foreclosed on and either have to leave the state or take up with friends/family ... how would you like to start over after 25 years employment at one company? Do you know what it would be like to have the rug pulled out from under your feet?

I think what Daryl is trying to say is this: GM management has been careless and inefficient in carrying out their responsibilities. A one or two time bail out will only solve the issue in short term period.. during which the execs will have board meetings and get their exit packages signed and later decide that they need more cash or a dramatic productivity and competitiveness boost to survive further.

Agreed it will be very sad to see such long term GM employees see their jobs getting threatened... but the bailout isnt going to help the families in the long run anyways... it is going to give the board some time-out so they can safely plan an exit. I can bet on that.

A more practical approach would be to have those people who dont want to see GM bankrupt, have them buy its shares today.. may be even at higher prices. This will certainly raise capital for the current stakeholders. Is the management doing that with their personal money? No. Because they dont want to risk their financial security... but they will risk yours the moment they fall short of operating cash.

I dont understand why people suddenly flip over and run to the government the moment Capitalism goes bad. If one believes in free market, then let the deserving fall.. and let the survivors flourish.

If GM dies, there will be others who take lesson and will become more productive and competitive and will create new jobs in teh mid-term to accomodate the ex-GM employees. Such should be the way of a free market.

Message edited by author 2008-12-03 20:12:37.

scarbrd

Leica M10

12/03/2008 03:10:23 PM · #78

Originally posted by DrAchoo:

Originally posted by pamelasue:
Hey there Daryl, why don't you come and visit the Motor City and I'll take you on a tour ... I'll introduce you to some of the people (my friends and family) that would be out of work if GM were to go under. Maybe you can visit their house, while it's still their house .. because if GM fails and they lose their jobs they don't stand a snowball's chance in hell of finding any other kind of employment in Michigan. That would mean that they would get foreclosed on and either have to leave the state or take up with friends/family ... how would you like to start over after 25 years employment at one company? Do you know what it would be like to have the rug pulled out from under your feet?

Putting a human face on a failing company doesn't mean letting it fail is not still the right answer. It just makes it harder...

It really sucked around here when Enron failed, and nobody talked about bailing them out. I knew lots of people out of a job after that fiasco.

I'm on the fence on the auto bail out thing, but get real if you think the bailout will prevent tons of layoffs, you are fooling yourself.

pamelasue

Tamron SP AF 28-75mm f/2.8 XR Di for Canon

12/03/2008 03:18:14 PM · #79

Originally posted by DrAchoo:

So why is it OK for the government to bail out the banking industry but not set aside money for loans to the auto industry? did you read Mitch Albom's column that I posted yesterday? if not, I ask that you do ... very enlightening reading ... article

Matthew

Peleng 8mm f/3.5 Fisheye MC In M42 Mount

12/03/2008 03:20:59 PM · #80

Originally posted by Spazmo99:

That's a big assumption. There's a big difference between restructuring under Ch 11 and being chopped up and sold off bit by bit under Ch 7.

The problem with the D3 restructuring under Ch 11 is twofold. One: Consumers are highly unlikely to purchase a car from a manufacturer that may not be around when they need service. In one survey I read, 70% of consumers would not buy a car from a manufacturer in bankruptcy. The common comparison is made to airlines going bankrupt, but a car is not like an airline ticket. If the airline goes bust,you're only out a few hundred bucks. Aside from a home, a car is the most expensive asset people buy, they're simply not willing to make the purchase from a company that may not be there when they need warranty service.

Second is the suppliers and the shortage of available credit. If the D3 are financially at risk, their suppliers will be unwilling to ship them parts on the 90 or 120 day terms that they need. If they can't pay their suppliers, they can't build cars and they will soon be out of Ch 11 and on the chopping block under Ch 7 being sold off bit by bit. Who would buy the pieces in this economy?

I don't think that these businesses are fundamentally flawed in a way that would justify Ch 7. The vast likelihood is that the core businesses would undergo a debt restructuring as part of Ch 11, possibly involving a quick sale.

There are international investors who could be interested in a US car manufacturer - at the right price and with certain historic liabilities compromised. New investment would likely fix the availability of credit.

PR would not be easy - but it is manageable in Ch 11 proceedings, especially if well managed with a quick turnaround and exit.

It is not an easy option, but Ch 11 is very much viable and Ch 7 can, and likely would, be avoided.

pamelasue

Tamron SP AF 28-75mm f/2.8 XR Di for Canon

12/03/2008 03:22:09 PM · #81

Originally posted by scarbrd:

Originally posted by DrAchoo:

Originally posted by pamelasue:
Hey there Daryl, why don't you come and visit the Motor City and I'll take you on a tour ... I'll introduce you to some of the people (my friends and family) that would be out of work if GM were to go under. Maybe you can visit their house, while it's still their house .. because if GM fails and they lose their jobs they don't stand a snowball's chance in hell of finding any other kind of employment in Michigan. That would mean that they would get foreclosed on and either have to leave the state or take up with friends/family ... how would you like to start over after 25 years employment at one company? Do you know what it would be like to have the rug pulled out from under your feet?

Putting a human face on a failing company doesn't mean letting it fail is not still the right answer. It just makes it harder...

It really sucked around here when Enron failed, and nobody talked about bailing them out. I knew lots of people out of a job after that fiasco.

I'm on the fence on the auto bail out thing, but get real if you think the bailout will prevent tons of layoffs, you are fooling yourself.

I'm fully aware that there will be a ton of layoffs, but there won't be 250,000 of them ... that will only happen if GM goes belly up ... don't punish hundreds of thousands of hard working American people because of the poor business model that GM currently has ... the bail out comes with a restructuring plan, a plan to make sure they succeed ... it's not going to be an overnight fix to this problem, it's going to take years and lots of hard work to accomplish a turn around of this magnitude ... don't you think that the people in Michigan are worth that?

12/03/2008 03:23:04 PM · #82

Originally posted by pamelasue:

Originally posted by DrAchoo:

Originally posted by pamelasue:
Hey there Daryl, why don't you come and visit the Motor City and I'll take you on a tour ... I'll introduce you to some of the people (my friends and family) that would be out of work if GM were to go under. Maybe you can visit their house, while it's still their house .. because if GM fails and they lose their jobs they don't stand a snowball's chance in hell of finding any other kind of employment in Michigan. That would mean that they would get foreclosed on and either have to leave the state or take up with friends/family ... how would you like to start over after 25 years employment at one company? Do you know what it would be like to have the rug pulled out from under your feet?

Putting a human face on a failing company doesn't mean letting it fail is not still the right answer. It just makes it harder...

So why is it OK for the government to bail out the banking industry but not set aside money for loans to the auto industry? did you read Mitch Albom's column that I posted yesterday? if not, I ask that you do ... very enlightening reading ... article

IMHO, the banking industry bailout was a loss, and should not have happened either. That money could have gone into infrastructure spendings. OR into having government own the securities rather than just giving freebie loans away.

cpanaioti

Canon EF 70-300mm f/4.5-5.6 DO IS USM

12/03/2008 03:24:05 PM · #83

Unfortunately, the banking system is at the core. The auto industry is just one of the players requiring banking services. It has a far more reaching effect if you let the banking system fail that letting one of the players requiring banking services fail.

That doesn't mean that some banks shouldn't be allowed to fail (some were allowed to).

The same goes for any industry falling on hard times. Yes, the big 3 do employ a large number of people and having any one of them fail will be a huge blow to a lot of people. However, if they don't have a plan to get themselves out of the mess (with the help of bailout money) then it would be throwing good money after bad and in the end they would fail anyway.

scarbrd

Leica M10

Leica 35mm f/1.4 Summilux M Aspherical MF - Black

12/03/2008 03:26:16 PM · #84

Originally posted by pamelasue:

Originally posted by scarbrd:

Originally posted by DrAchoo:

Originally posted by pamelasue:
Hey there Daryl, why don't you come and visit the Motor City and I'll take you on a tour ... I'll introduce you to some of the people (my friends and family) that would be out of work if GM were to go under. Maybe you can visit their house, while it's still their house .. because if GM fails and they lose their jobs they don't stand a snowball's chance in hell of finding any other kind of employment in Michigan. That would mean that they would get foreclosed on and either have to leave the state or take up with friends/family ... how would you like to start over after 25 years employment at one company? Do you know what it would be like to have the rug pulled out from under your feet?

Putting a human face on a failing company doesn't mean letting it fail is not still the right answer. It just makes it harder...

It really sucked around here when Enron failed, and nobody talked about bailing them out. I knew lots of people out of a job after that fiasco.

I'm on the fence on the auto bail out thing, but get real if you think the bailout will prevent tons of layoffs, you are fooling yourself.

I'm fully aware that there will be a ton of layoffs, but there won't be 250,000 of them ... that will only happen if GM goes belly up ... don't punish hundreds of thousands of hard working American people because of the poor business model that GM currently has ... the bail out comes with a restructuring plan, a plan to make sure they succeed ... it's not going to be an overnight fix to this problem, it's going to take years and lots of hard work to accomplish a turn around of this magnitude ... don't you think that the people in Michigan are worth that?

I do think the people of Michigan are worth it, just like I think the people of Texas are worth it. Do we get a bailout if oil drops to $25 a barrel?

12/03/2008 03:27:20 PM · #85

Originally posted by pamelasue:

Its not just about the people in Michigan. Hard working people ANYWHERE deserve a fair chance. But I dont think a bailout will be a fair chance and will reach the real people in the form of a stimulus that is needed. It will end up in short term management level patching work and a few good months delay of the unavoidable.

What we need is a stimulus.. into the infrastructure. Not freebies. Nobody made it big on freebies.. there is just no accountability to public resources that way. And I am sure hard working people would not like that either.

12/03/2008 04:04:52 PM · #86

Originally posted by conceptgraphics:

I'd be more likely to support the bailout if taxpayers received shares of stock in exchange for the 'loan money'. Every taxpayer receives one share at current face value. When the market rebounds we all win: The auto industry gets it's money, the public gets reciprocation, the government gets credit for putting a band-aid on the failing economy. The current proposal only promises sour grapes.

Oh no!!! That would never fly, that would be SOCIALISM and we all know how EVIL that would be. You might as well put Karl Marx

Tamron SP AF 90mm f/2.8 Di for Nikon

12/03/2008 04:09:46 PM · #87

Originally posted by LoudDog:

Quit drinking the D3 kool aid. 3,000,000 people will not lose their job if the big three fail. Plus, I highly doubt all three will fail. Probably just GM.

Failed business plan: //finance.yahoo.com/q/bs?s=GM&annual
Net tangible assets for GM (total of what they have minus what they owe):
Dec 2005 $10,258,000,000
Dec 2006 NEGATIVE $6,559,000,000
Dec 2007 NEGATIVE $38,160,000,000
June 2008 NEGATIVE $58,040,000,000 (you have to click over to quarterly to get this number)
Any guesses for December 2008???

When a company loses $68 billion dollars over the course of three years (actually three really bad months shy of three years) I call it a failed business plan. And on the streak they are on, I can't see how 10, 20 or 30 billion will keep GM afloat very long. Thus, taxpayer money to them in the form of a loan will simply disappear when they go belly up.

I'm well schooled on supply and demand. When GM is gone people will still need cars and people will still have to build cars. Loss of supply does not reduce demand. GM's market share will simply move to the surviving companies. Yeah, some will go to the J3, but it could be a good little boost for Ford and Chrysler.

But, if you think GM is such a great company and is just going through rough times, thus deserving of a government loan (because no one else will loan them any more money), buy their stock. At $4.75 a share you can make a killing if they bounce back.

If you're well schooled on supply and demand, you should know that reduced supply doesn't reduce demand and that scarcity leads to increases in price.

All I'll say is it's a damn good thing you aren't in charge.

JMart

Nikon D80

12/03/2008 04:13:10 PM · #88

Originally posted by Spazmo99:

Originally posted by LoudDog:
Originally posted by Spazmo99:

Originally posted by LoudDog:
If I were paid $20,000,000/year to run a company and had to beg the government for loans to survive Iâ��d be very embarrassed. Why are you paid that much if you can not turn a profit? What do you do to deserve that pay? Superior begging skills?

Good question, it's one that should be asked of many CEO's especially those who ran banks. BTW, the numbers you see for the pay that the automotive CEO's get is misleading. The SEC reports their options as being valued at the face value, however, since the stock prices have fallen, those options are worthless and that will reduce that $20,000,000 by about 90%. The CEOs at the failed banks don't take that hit.

If I were paid $2,000,000 or even $200,000 per year and had to beg for taxpayer money to keep my business running Iâ��d be embarrassed. Shame on those other overpaid empty suits too.

No disagreement there, but you're willing to screw 3 million people and destroy a whole industry to satisfy your desire to take down those few. Nice.

Uh, pay attention to details and don't just throw all of these guys into the same bucket. Look a little closer and you'll see that the current CEOs are not all the ones who created the problems. The Ford & Chrysler CEOs in particular are relatively new and the Ford CEO in particular, Alan Mulally, is the reason Ford is in the best shape of the big three. Mulally helped turn around Boeing before he took over Ford in 2006 and significantly cut costs to turn Ford towards profitability (which it was at the start of 2008). I think this guy has done a hell of a job, and yes, he did agree to have his pay cut to $1 if Ford has to take any of the government loans.

glad2badad

DJI Mavic Air 2

Sears 55mm f/1.4 M42

12/03/2008 04:25:14 PM · #89

Underlining added for emphasis.

Originally posted by Spazmo99:

Originally posted by LoudDog:
... Loss of supply does not reduce demand. ... it could be a good little boost for Ford and Chrysler. ...

If you're well schooled on supply and demand, you should know that reduced supply doesn't reduce demand and that scarcity leads to increases in price. ...

???

12/03/2008 04:47:12 PM · #90

You people who are against the loans to the D3 are nothing short of heartless. I hope that one day each of you loses your entire livelihood because some other scroogey bastards were so short sighted they couldn't see the forest for the trees.

Nikon AF-S DX NIKKOR 18-200mm f/3.5-5.6G ED VR II

12/03/2008 04:58:25 PM · #91

Originally posted by Spazmo99:

I dont know about you... but I cannot believe a short term loan will improve anything but some stakeholder's portfolios. As Doc said before, if you try to put a human face to the issue, it wont make everything valid.

Think about how this proposed bailout will help hard working families in the long term.. it wont. Tell me: will 25 billion make GM more competitive against the more popular Japanese cars????

When you talk about free market, let the radicals behave freely. There is no point artificially giving flight to an obviously weak entity. If one falls, the others who are in relatively better shape will either become more productive and efficient and will survive, or will collapse because they didnt learn at all.. which is fine by me.

A short term bailout isnt going to improve the management efficiency.

ETA: Talk about the main street initially softened ways for the fnancial industry bailout.. and now talking about the hard working families in Michigan, people are trying to make another one happen. When in reality, everybody knows a short term help is not going to help at all. Some people (in management and on the boards, not the low/middle level employees) need to get their acts together and learn that they cant just get away with every such issue. Threaten their golden savings, and you will see some crisply suited asses running the units at 200% efficiency. A bailout isnt going to help. A direct stimulus to the families may help. I refuse to see a single penny of my tax dollar in the hands of another D3 executive. Period.

Message edited by author 2008-12-03 22:03:52.

swankFoto

Fujifilm X-E1

12/03/2008 05:36:38 PM · #92

Have the Oil companies bail them out.

12/03/2008 05:43:48 PM · #93

I'm done here.

If idiots like you keep these loans from happening, you'd better be hoarding gold, food, guns and ammo because the bottom is going to drop out and the ride to the bottom is going to be brutal for everyone. How many people make it back out will be a crapshoot.

If you think the economy is bad now, you haven't seen anything yet.

12/03/2008 06:21:14 PM · #94

At 90 years of age (if thats your true age), you have probably seen the 30's depression. So no argument there. Yet you provide no input as to how such bailouts will help.

It might help if you provided some insight into how such loans will help in the long term. It will certainly NOT help to call those idiots who are looking at all this analytically. It is very easy for one to call you back the 'I' word, but that is not the right thing to do.

Message edited by author 2008-12-03 23:27:52.

Patents4u

12/04/2008 07:07:54 AM · #95

Originally posted by Prash:

Think about how this proposed bailout will help hard working families in the long term.. it wont. Tell me: will 25 billion make GM more competitive against the more popular Japanese cars????

When you talk about free market, let the radicals behave freely.

Well, if you believe what you say, then let me ask you to reconsider a couple of very significant misconceptions you've thrown out here, and almost everyone on your side of the coin throws out, probably because the media report it, people repeat it and eventually it seems to carry weight.

First, "more popular Japanese cars"? Are you telling me there are more Japanese cars than American cars sold in the world? That's right up there with the oft-abused statement that the US auto companies don't build cars people want to buy....yet the US auto companies still sell more cars than any other country (or at least it is damn close - haven't seen the latest stats), and their product lines are vastly superior to what they were even 5 years ago so the trends would otherwise be favorable if not for the horrible publicity of late. Even so, you'll note the slumping sales are nearly as bad for the Japanese brands (35-40% lower last month) as the American brands. "Popularity" as you state it is not reality.

Next, you throw out the term "free market". But much of the world is not a free market. We permit relatively free competition here in the US, even among companies getting help from their own governments, and further help here in the form of tax breaks, no unions, etc. **It's all over the news that the European Commission has now pledged to help their car industry to the tune of 200 BILLION EURO (US $258.8 billion)**. The US companies seek a fraction of that from our government. The Japanese companies have benefited from currency controls (it has been estimated that 25% of Toyota's profits in 2005-6 came only from currency exchange! I have not seen data for 2007-8) and other assistance. Etc, etc, etc.

It is anything but a free and equal market.

As to how the money will aid their recovery rather than postpone their demise, I urge you to do some research rather than throw out a seat-of-your pants feeling on the issue. Your posts indicate you are a rational thinker - get some recent and relevant information to think about (e.g. in the US it costs a lot of money to shutter a brand (like Oldsmobile) due to myriad regulations but doing so is what GM must do, the US auto companies had good benefits for their employees and retirees and those costs are now choking them - it costs money to reduce those burdens (which people are screaming for and ironically it usually is the same people that rail against WalMart for NOT taking care of their employees well enough), etc. On a lot of fronts, cash will significantly reduce GM's burdens and almost immediately make them even more competitive.

Don't get me wrong, I'm not suggesting the US auto companies are blameless, but the situation is not what some make it out to be. They are far leaner and better run than they were even just 5 years ago - I'll say it again - the loans they seek are not the start of their restructuring or turnaround by any means. They started on that path long ago and are well on their way.

If time permits, I'll respond to your other statements that don't hold up any better under reality's light. But hopefully, in the meantime, you and a few others will do a little more research before choosing as your own the opinions of a few media outlets.

DrAchoo

Panasonic Lumix DMC-LX5

12/04/2008 07:56:43 AM · #96

GM did sell more cars than anybody else in 2007. Barely. "GM announced that it sold 9.369 million vehicles, compared to Toyota's 9.366 million."

"Even with GM's surprisingly good sales performance, though, when it comes to the number investors are most interested in, profit, the two global giants tell very different stories. GM hasn't announced fourth quarter earnings yet, but it lost a whopping $38 billion in the first three quarters of 2007. Toyota, on the other hand, is sitting in record profits of nearly $15 billion for 2007."

GM is apparently trying to employ the oft-failed mantra of, "We lose money on each unit, but we make up for it in volume."

Clearly Toyota is outclassing GM. Even if I take the quoted "25% of Toyota's profits in 2005-6 came from currency exchange" at face value, they still made a profit (and I'm assuming 75% came from selling cars). No matter how you slice it, Toyota is being run better than GM.

Matthew

Peleng 8mm f/3.5 Fisheye MC In M42 Mount

12/04/2008 07:58:12 AM · #97

Originally posted by Patents4u:

As to how the money will aid their recovery rather than postpone their demise, I urge you to do some research rather than throw out a seat-of-your pants feeling on the issue. ... On a lot of fronts, cash will significantly reduce GM's burdens and almost immediately make them even more competitive.

I would say that there are two solutions: Chapter 11 proceedings to reduce the debt burden, or multi-billion bail out to reduce the debt burden. Either process would work and there are pros and cons to each.

Patents4u

12/04/2008 08:15:43 AM · #98

Originally posted by DrAchoo:

No matter how you slice it, Toyota is being run better than GM.

I won't argue the general statement, but the magnitude. And you seem to assume a level playing field when the field is anything but level. It is recently better, and hopefully it will get there. But if you want to only look at profit, there is a whole lot that goes into those numbers beyond simply being "better run". Throwing that out and not considering cost structure, legacy costs and related items does nothing for me.

Patents4u

12/04/2008 08:23:27 AM · #99

Originally posted by Matthew:

No one knows for sure, but most economists I've heard suggest chapter 11 is not the way to go - not at this time, in this economy. The theory of and arguments for chapter 11 restructuring seem to assume sane financial markets and consumer decisions. That is not the reality of today.

To further the point, other governments in today's world seem intent on not letting that happen to their companies. This is not an issue only for the US companies.

DrAchoo

Panasonic Lumix DMC-LX5