GM and Chrysler Pushing for Merger

[Admiral Beez]

IMO, Chrysler and Ford are a better fit. GM just has far too many brands under its umbrella.

GM should buy Chrysler and then liquidate it, shut down the plants, sell off everything. Thus, reducing capacity in the market, along with ensuring that those who would want to buy domestic now have only two choices, instead of three.

 

[Admiral Beez]

They simply need to expand customer choice.

No, no...they need to reduce customer choice to those items that the customer wants. That means more Maliboos and less Aztecs, for example. Too many vehicles coming from too many factories with too many worker, too many costs and most of all too many products no one wants, is what's killing GM.

GM needs to significantly shrink (after buying Chrysler) to a manageable size.

 

[MisterF]

Even the automakers don't have that ambitious a goal. At the most hybrids share of the total fleet will rise 1% a year.....

If costs can be reduced to close to a similar gas-powered car, there's no reason why plug-in hybrids can't get massive market share eventually.

 

[kEiThZ]

If costs can be reduced to close to a similar gas-powered car, there's no reason why plug-in hybrids can't get massive market share eventually.

That will never happen. You will not get the cost of a hybrid with two powertrains (effectively) down to the price of a gasoline automobile with one upscaled powertrain.

 

[MisterF]

^Plug-in hybrids have only one powertrain. A simpler one than regular cars too - no transmission.

 

[Glen]

^Plug-in hybrids have only one powertrain. A simpler one than regular cars too - no transmission.

Serial ones, not parallel, do not require a transmission.

 

[MisterF]

Serial ones, not parallel, do not require a transmission.

Right. The Chevrolet Volt is a series hybrid.

 

[Whoaccio]

Auto makers plead for 'survival' loans

GREG KEENAN

From Friday's Globe and Mail

November 7, 2008 at 12:00 AM EST

The Canadian units of the Detroit Three auto makers have stepped up their campaign to win government financial help, warning Ottawa and Ontario that the industry “is struggling for survival.â€

Chrysler Canada Inc., Ford Motor Co. of Canada Ltd., and General Motors of Canada Ltd. are seeking meetings with Ontario Premier Dalton McGuinty and federal Industry Minister Tony Clement to press their case for emergency credit in the form of loan guarantees, low-interest loans or commercial paper funding programs.

The three auto makers said they support a request by the Automotive Parts Manufacturers' Association of Canada, which told the two governments last month that parts suppliers need emergency help. APMA president Gerry Fedchun said suppliers need about $1-billion in emergency financial help.

The request through the Canadian Vehicle Manufacturers' Association comes as the parent companies of Ford and GM announce what are expected to be dreadful third-quarter financial results today and another round of job cuts, temporary plant closings and other measures to conserve cash and reduce costs.

“The numbers, as we know, are going to be just horrific,†veteran industry watcher Joe Phillippi, who heads Auto Trends Consulting Inc. of Short Hills, N.J., said of the financial results.

GM is expected to post a loss of $5.30 (U.S.) a share, but more importantly, the company dramatically increased the cash it burned through during the quarter to $4.8-billion, worse than the $3-billion drain in the second quarter, Itay Michaeli, auto analyst for Citigroup, said in a note to clients yesterday.

“This would leave GM's year-end 2008 cash balance at $15-billion, just above its $11- [to] $14-billion minimum operating threshold, emphasizing the urgent need to address liquidity,†wrote Mr. Michaeli, who expects more cost-cutting and a trim in capital spending.

Ford's cash burn is expected to double to $3.4-billion for the quarter, from $1.7-billion a year earlier, he added.

GM, which has been in negotiations with Chrysler LLC parent Cerberus Capital Partners LP about a merger of the two auto makers, has scheduled a company-wide internal broadcast for 11 a.m. today to discuss what a memo said were “important changes†to meet the challenges of the credit crisis and the slump in U.S. sales.

“I'm nervous,†said Chris Buckley, president of Canadian Auto Workers Local 222, which represents employees at GM's pickup truck and car assembly plants in Oshawa, Ont.

Ford sales analyst George Pipas hinted on a conference call earlier this week that the No. 2 Detroit auto maker was preparing to announce cuts in production of crossover utility vehicles. Three such vehicles are assembled at the company's Oakville, Ont., complex.

Mark Nantais, president of the CVMA, confirmed that Chrysler, Ford and GM are seeking meetings, but would not elaborate.

“With the global financial liquidity crisis and the collapse in the U.S. consumer market, Ontario's auto industry, which exports 85 to 90 per cent of its finished product into the U.S. market, is struggling for survival,†the CVMA said in a letter to Mr. McGuinty and Mr. Clement.

AUTO MAKERS ON THE BRINK

-- Toyota Motor Corp. said annual profits are expected to plunge more than two-thirds to the lowest level in nine years, warning the global auto industry faces an “unprecedented†crisis.

-- Chief executives of the three U.S. auto makers lobbied House Speaker Nancy Pelosi yesterday for up to $25-billion (U.S.) in additional aid and access to the U.S. Federal Reserve Board's borrowing window, sources said.

-- The Bush administration said auto makers could soon begin applying for money under an existing $25-billion package of low-interest loans to help them meet fuel-efficiency requirements.

-- Auto parts maker Dana Holding Corp. said it will close up to 10 U.S. plants and cut 2,000 more employees than originally planned as its losses grew. From wire services

 

[Whoaccio]

Maybe this thread should just be renamed "the coming bankruptcy of the big 3" or something like that.

On one hand, I can understand the natural inclinations that any government will have towards bailing the big 3 out. Especially Obama, given the importance of Ohio, Michigan and white, working class types in general, to his campaign. I should hope Harper will be more tempered in his reaction, given that Western Canada would (and should) despise it's money going to bail out branch plants of foreign companies. If Harper thinks he could make a big breakthrough in Ontario though, maybe take some of the NDP seats, politics could get the better of policy. I'm not sure about the numbers, but I have heard that if one of the big 3 goes down, upwards of a million jobs will be lost. It would be quite something for the "elitist" Obama to let that many jobs just disappear because of his inaction.

On the other, it is clearly stupid policy. Ontario has poured god knows how many billions into the big 3, and all we have to show for it is a bloody Chevy Camaro plant! Even the most removed of bureaucrats should have been able to see an issue with subsidizing a poor mans corvette with a 6L V8 engine during a recession and triple figure oil prices. The only people who would really benefit from such a large scale corporate welfare would be the incompetent management, who would probably just use the extra time to move their money to Dubai.

I say let em fail. There is no reason, in a recession, hardworking people should have to fork over billions to overpaid unions and inept management.

 

[Hydrogen]

You'll fork over billions of supports for all those made unemployed and for the damage done to the economy.

Like so many other industries, the automobile industry is supported by governments because of the incomes and other economic goods it generates. Ontario or the United States are by no means alone when it comes to such supports; they exist everywhere and are often presented in different ways.

 

[Uncle Teddy]

On the other, it is clearly stupid policy. Ontario has poured god knows how many billions into the big 3, and all we have to show for it is a bloody Chevy Camaro plant! Even the most removed of bureaucrats should have been able to see an issue with subsidizing a poor mans corvette with a 6L V8 engine during a recession and triple figure oil prices. The only people who would really benefit from such a large scale corporate welfare would be the incompetent management, who would probably just use the extra time to move their money to Dubai.

And how many billions have the automakers poured into Ontario over the years? You seriously want to see the number one economic engine in the province to disappear? These companies provide hundreds of thousands of high paying jobs. Those jobs pump a lot of money into the province and into the government coffers. Remove them and we'll be a have not province for a very long time. And the 1930's will be a time to long for.

 

[Whoaccio]

And how many billions have the automakers poured into Ontario over the years? You seriously want to see the number one economic engine in the province to disappear? These companies provide hundreds of thousands of high paying jobs. Those jobs pump a lot of money into the province and into the government coffers. Remove them and we'll be a have not province for a very long time. And the 1930's will be a time to long for.

That doesn't really make sense though. I don't want the "number one economic engine in the province" to disappear, I just don't want to give GM billions of tax dollars for them to assemble sub standard cars. They aren't even "Canadian" companies, really. In any case, these massive corporate subsidies rarely affect anything an often just make things worse. They have two fundamental problems, one that they strangle successful sectors of the economy more so than they "relieve" unsuccessful sectors and second that they actually strangle parts of the smaller companies in the receiving sector.

The first part is quite logical really, taking tax dollars from struggling businesses all throughout the province/country/continent and giving it to the Big 3 does not put society ahead at all. Think about it, how would taking already existing wealth from a relatively productive sector and putting it into a relatively less productive sector help society at all? There is no free lunch after all. The government of Ontario could just as well go to Yorkville and drop the billions of dollars and claim all of the notorious "spin off effects" that go along with any kind of economic activity (one manufacturing job creates 7 non manufacturing jobs...). At the end of the day, there is no way to prove that just as many jobs wouldn't be created by leaving the proposed bail out money in the hands of its owners.

The second part is less obvious. There is this great persistent notion that corporate subsidies on the order of billions of dollars helps "the little guy" (*insert image of quaint suburban autoworker with young family*). If you look at who receives these handouts though, it is never the little guy. GM, Ford, Chrysler and those with the biggest pockets for lobbyists and political contributions are always the ones who get the handouts, not the smaller business' that may or may not 'deserve' handouts. What is the point? Those aren't even Canadian companies.

 

[Glen]

I'm not sure about the numbers, but I have heard that if one of the big 3 goes down, upwards of a million jobs will be lost. It would be quite something for the "elitist" Obama to let that many jobs just disappear because of his inaction.

In the US, using a forward multiplier, it is commonly assumed that the failure of GM alone would ultimately result in the loss of 2.5 million jobs.

 

[Whoaccio]

In the US, using a forward multiplier, it is commonly assumed that the failure of GM alone would ultimately result in the loss of 2.5 million jobs.

Then again, it doesn't follow that if they get bailed out 2.5m jobs will be "saved." It would depend on how robust a bailout package is, and about a dozen other variables, but it would follow that even with a bailout hundreds of thousands of jobs would still be lost. If the big 3 aren't profitable, all they will really be able to do is continue to downsize. A bailout package would prolong this, and maybe give them a bit more breathing room, but it wouldn't change the reality that they are a long way from profitable.

 

[Hydrogen]

When it comes to supports, hundreds of thousands of jobs lost is much better than millions of jobs lost. It's also better to have a North American car maker with North American employment than purchasing imports. If one of these producers is lost for good, then the jobs are not coming back. All major North American car companies have been profitable in the past, some of their present problems have to with major money constraints related to contract agreements as well.

Also, when you say "sub standard" are you just repeating the cliche that cars built here are all awful? Is that cliche alone an argument for allowing large numbers of people to be put out of work permanently?