GM and Chrysler Pushing for Merger

[Mustapha]

Oh, let the oil companies bail them out.

 

[cacruden]

I would rather buy GM at $3, even without hope for government assistance than CIBC without government assistance. With some good products on stream and more coming (thanks to Bob Lutz) and a Chapter 11 clearing, makes GM at $3 look cheap. CIBC or BMO, without help, look(ed) overpriced.

I don't think that they should give them assistance without conditions, but I do think that they are more than salvageable. Unlike banks, auto manufacturers face much greater latencies in effecting changes. New products take 3 to 4 years to develop and ready for production. As I taxpayer, I think that $1 billion in loans (with conditions) to the auto sector is a much more prudent use of resources than this weeks $75 billion purchase of mortgages by the BoC. What are the banks doing with the added room on their balance sheets? I don't suspect we are going to see $75 billion in increased lending.

Without a bailout, GM is bankrupt in months (Chapter 7 - liquidation). Ford will likely not survive the recession, add 3 million to the unemployed line - taking out most of the car parts suppliers, etc. The financial markets will fall anouther 25% from here. That is how bad the situation is for them.

 

[cacruden]

I would rather buy GM at $3, even without hope for government assistance than CIBC without government assistance. With some good products on stream and more coming (thanks to Bob Lutz) and a Chapter 11 clearing, makes GM at $3 look cheap.

They have a very heavy debt, they were loosing market share before people stopped buying cars, GMAC was obliterated by being in the mortgage industry, they were loosing money before things turned back, they likely will have a large pension liability because of the drop in the markets, that is just the beginning.

Assuming they are allowed to file Chapter 11 (not chapter 7), the stock holders are low on the list -- and thus new stock issued - old stock retired - worthless.

 

[urbanfan89]

I would rather buy GM at $3, even without hope for government assistance than CIBC without government assistance. With some good products on stream and more coming (thanks to Bob Lutz) and a Chapter 11 clearing, makes GM at $3 look cheap. CIBC or BMO, without help, look(ed) overpriced.

You're lucky you didn't fall into the hype and buy Nortel stock in 2000.

 

[Glen]

GM Collapse at $200 Billion Would Exceed Bailout Tab, Firm Says

Nov. 15 (Bloomberg) -- General Motors Corp., burning through cash as sales slump, would cost the government as much as $200 billion should the biggest U.S. automaker be forced to liquidate, a forecasting firm estimated.

A GM collapse would mean ``more aid to specific states like Michigan, Ohio, and Indiana, and more money into unemployment and extended benefits,'' Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts, said yesterday in an interview.

Behravesh's projection of $100 billion to $200 billion in costs dwarfs the $25 billion industry bailout plan that will be debated in Congress next week to prop up Detroit-based GM, Ford Motor Co. and Chrysler LLC. The drain on taxpayers from a rescue or a GM failure is a central issue for U.S. lawmakers.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a0Ee7HIsw7Ao&refer=home

 

[Hydrogen]

As far as I have been able to discern, Hydrogen's main arguments have been centered around the Big3's large employment and the necessity of government intervention to prevent large scale unemployment which would, presumably, results from a bankruptcy of one or all of the Big3. This view owes nothing to practicality and rationality and more to a misplaced idealism in both the ability of governments to enact beneficial changes in the economy as well as the underlying importance of the Big3 to the North American economy.

I don't know where you are getting the notions of "misplaced idealism" from. As for questioning my rationality, let me question yours. You state tacit support for a welfare state, but reject supports for the companies that employ people - and could continue to employ people far into the future. For you, it's just all better to let these companies fail.

Your "rationality" is to allow the companies to fail, and then have the state support the workers who lose their jobs as well. You pay no attention to the costs (lost pensions, lost health care benefits, etc). You also pay no attention to the lose of an entire sector of manufacturing. The benefits of employment will disappear, largely overseas.

Once again, there are no details of a "bailout" to discuss presently. Your posts appear to suggest a free cash give-away. It's highly likely that nothing of the sort will happen. And if help comes from the government, there will, no doubt, be many strings attached.

One last point, the automobile sector is nothing like retailers such as Walmart or Circuit City. As for Nortel, my friends who work there tell me it ain't going bankrupt any time soon.

 

[afransen]

Hasn't Nortel sold off much of their R&D? Doesn't seem to bode well for the company in the future.

 

[W. K. Lis]

GM Must Re-Make the Mass Transit System it Murdered

From a CommonDreams.org article:

GM Must Re-Make the Mass Transit System it Murdered

by Harvey Wasserman

Bail out General Motors? The people who murdered our mass transit system?

First let them remake what they destroyed.

GM responded to the 1970s gas crisis by handing over the American market to energy-efficient Toyota and Honda.

GM met the rise of the hybrids with "light trucks."

GM built a small electric car, leased a pilot fleet to consumers who loved it, and then forcibly confiscated and trashed them all.

GM now wants to market a $40,000 electric Volt that looks like a cross between a Hummer and a Cadillac and will do nothing to meet the Solartopian needs of a green-powered Earth.

For this alone, GM's managers should never be allowed to make another car, let alone take our tax money to stay in business.

But there is also a trillion-dollar skeleton in GM's closet.

This is the company that murdered our mass transit system.

The assertion comes from Bradford Snell, a government researcher whose definitive report damning GM has been a vehicular lightening rod since its 1974 debut. Its attackers and defenders are legion. But some facts are irrefutable:

In a 1922 memo that will live in infamy, GM President Alfred P. Sloan established a unit aimed at dumping electrified mass transit in favor of gas-burning cars, trucks and buses.

Just one American family in 10 then owned an automobile. Instead, we loved our 44,000 miles of passenger rail routes managed by 1,200 companies employing 300,000 Americans who ran 15 billion annual trips generating an income of $1 billion. According to Snell, "virtually every city and town in America of more than 2,500 people had its own electric rail system."

But GM lost $65 million in 1921. So Sloan enlisted Standard Oil (now Exxon), Philips Petroleum, glass and rubber companies and an army of financiers and politicians to kill mass transit.

The campaigns varied, as did the economic and technical health of many of the systems themselves. Some now argue that buses would have transcended many of the rail lines anyway. More likely, they would have hybridized and complemented each other.

But with a varied arsenal of political and financial subterfuges, GM helped gut the core of America's train and trolley systems. It was the murder of our rail systems that made our "love affair" with the car a tragedy of necessity.

In 1949 a complex federal prosecution for related crimes resulted in an anti-trust fine against GM of a whopping $5000. For years thereafter GM continued to bury electric rail systems by "bustituting" gas-fired vehicles.

Then came the interstates. After driving his Allied forces into Berlin on Hitler's Autobahn, Dwight Eisenhower brought home a passion for America's biggest public works project. Some 40,000 miles of vital eco-systems were eventually paved under.

In habitat destruction, oil addiction, global warming, outright traffic deaths (some 40,000/year and more), ancillary ailments and wars for oil, the automobile embodies the worst ecological catastrophe in human history.

Should current General Motors management be made to pay for the ancient sins of Alfred Sloan?

Since the 1880s, American corporations have claimed human rights under the law. Tasking one now with human responsibilities could set a great precedent.

GM has certainly proved itself unable to make cars that can compete while healing a global-warmed planet.

So let's convert the company's infrastructure to churn out trolley cars, monorails, passenger trains, truly green buses.

FDR forced Detroit to manufacture the tanks, planes and guns that won World War 2 (try buying a 1944 Chevrolet!). Now let a reinvented GM make the "weapons" to win the climate war and energy independence.

It demands re-tooling and re-training. But GM's special role in history must now evolve into using its infrastructure to restore the mass transit system---and ecological balance---it has helped destroy.

 

[Glen]

^ What a load of crap! One would have to reach deep into the vindictive pool to draw such conclusions. I await the driving a VW = Nazi support plus the assassination of the 300 mpg carburetor inventor articles.

 

[Brian69]

It's somewhat of a stretch blaming the big 3 for the death of mass transportation (the government deserves an equal if not greater share of the blame); however, the article does hit on some key issues as does Hipster Duck's article on the previous page. There is no indication the bailout will improve the business practices of the big 3, and we already know that union and legacy costs will continue to cut into profitability for the foreseeable future.

The big 3 should have made improvements before they approached bankruptcy. At the risk of making a comparison (because people love to jump on them) it's akin to a thief regretting his actions only after he's have been caught; there's no indication he was were going to change his ways before and no indication he will change his ways in future. The bailout is a reward for poor business practices that is only given because of the size of the big 3; assuming it will have an impact flies in the face of everything the big 3 has done until now and, personally, is not the way I wish my tax dollars to be spent. And for those who feel it will have a negative impact on the economy I ask--what guarantee do we have that all these loans will change anything in future based on everything that has happened so far? The loan of today can become the write-off of tomorrow.

 

[Glen]

The big 3 should have made improvements before they approached bankruptcy. At the risk of making a comparison (because people love to jump on them) it's akin to a thief regretting his actions only after he's have been caught; there's no indication he was were going to change his ways before and no indication he will change his ways in future. The bailout is a reward for poor business practices that is only given because of the size of the big 3; assuming it will have an impact flies in the face of everything the big 3 has done until now and, personally, is not the way I wish my tax dollars to be spent. And for those who feel it will have a negative impact on the economy I ask--what guarantee do we have that all these loans will change anything in future based on everything that has happened so far? The loan of today can become the write-off of tomorrow.

The indicators show that they were changing, and it started before the current crisis.

General Motors has come to Washington, begging for a $25 billion bailout to keep it and its ailing Detroit counterparts going next year. But nobody seems too thrilled about the prospect. Liberals dwell on the companies' gas-guzzling sport-utility vehicles. Conservatives obsess over all the well-paid union members with gold-plated benefits. And people of all ideological backgrounds remember how they used to buy domestic cars, years ago, but stopped because the cars were so damn lousy. "The downfall of the American auto industry is indeed a tragedy," the Washington Post editorial board sermonized recently, "but the automakers and the United Auto Workers have only themselves to blame for much of it." And, if they have only themselves to blame, the argument goes, why do they deserve taxpayer help? Let them fail and file for bankruptcy. In the long run, the economy will be stronger and the workers better off. It'd be worth?the short-term pain, which might not even be so severe.

In normal times, with another company, that might be correct. But these are not normal times, just as GM is not any old company. Nor is the simple economic morality tale everybody repeats about the auto industry accurate. Detroit has come a long way since the days of wide lapels and disco. GM, Ford, and Chrysler are taking precisely the sorts of steps everybody says are necessary--or, at least, they were taking those steps until an unexpected trifecta of high gas prices, vanishing credit, and a deep recession hit. Rescuing the auto industry is not, as so many people suppose, a question of giving Detroit one extra shot at transformation. It's a question of giving Detroit a chance to finish a transformation that was already underway.



One reason for the casual support for letting GM fail is the assumption that bankruptcy would be no big deal: As USA Today editorialized recently, "Bankruptcy need not mean that the company disappears." But, while it's worked out that way for the airlines, among others, it's unlikely a GM business failure would play out in the same fashion. In order to seek so-called Chapter 11 status, a distressed company must find some way to operate while the bankruptcy court keeps creditors at bay. But GM can't build cars without parts, and it can't get parts without credit. Chapter 11 companies typically get that sort of credit from something called Debtor-in-Possession (DIP) loans. But the same Wall Street meltdown that has dragged down the economy and GM sales has also dried up the DIP money GM would need to operate.

That's why many analysts and scholars believe GM would likely end up in Chapter 7 bankruptcy, which would entail total liquidation. The company would close its doors, immediately throwing more than 100,000 people out of work. And, according to experts, the damage would spread quickly. Automobile parts suppliers in the United States rely disproportionately on GM's business to stay afloat. If GM shut down, many if not all of the suppliers would soon follow. Without parts, Chrysler, Ford, and eventually foreign-owned factories in the United States would have to cease operations. From Toledo to Tuscaloosa, the nation's?assembly lines could go silent, sending a chill through their local economies as the idled workers stopped spending money.

Restaurants, gas stations, hospitals, and then cities, counties, and states--all of them would feel pressure on their bottom lines. A study just published by the Michigan-based Center for Automotive Research (CAR) predicted that three million people would lose their jobs in the first year after such a Big Three meltdown, swelling the ranks of the unemployed by nearly one-third nationally and leading to hundreds of billions of dollars in lost income. The Midwest would feel the effects disproportionately, but the effect would reach into every community with a parts supplier or factory--and, to a lesser extent, into every town and city with a dealership. In short, virtually every community in the country would be touched.

http://www.tnr.com/politics/story.html?id=a4893b49-36df-4784-9859-2dfa3a3211bf

 

[Hipster Duck]

^I don't buy the supplier argument.

Most of the Toyotas and Hondas driven on North American roads today are built here in North America (many in Ontario), and their parts suppliers are - get this - also North American! If the economy rebounds without GM, we can fairly assume that Toyota, Honda, etc. will capture the bulk of that missing 25% market share and that auto parts manufacturers across the continent will be humming again.

Besides, the future for GM in the short term (assuming it survives on government largesse) is to essentially rebadge Opel compact cars as Saturns and Chevrolets. How is a "Saturn" Astra designed in Rüsselsheim and assembled in Antwerp any more of a domestic car than a Camry designed in Nagoya but built in Kentucky? Do you think that Opel hunts around for North American-built parts when it assembles Astras for import? Get real.

 

[Whoaccio]

I don't even understand how GM going bankrupt would suddenly force all of the various factories & plants to evaporate. We have bankruptcy protection for a reason. The company would be given time to restructure, renegotiate labor contracts, secure new financing and amputate the it's less successful divisions, in the meantime people would still be employed.

Hipster Duck's point is accurate as well. American cars are hardly "American" to begin with. What exactly is the difference between Toyota assembling a Corrola in Cambridge and GM assembling a Daewoo Kalos (oops, 'Chevy Aveo') in Mexico?

 

[syn]

^I don't buy the supplier argument.

Most of the Toyotas and Hondas driven on North American roads today are built here in North America (many in Ontario), and their parts suppliers are - get this - also North American! If the economy rebounds without GM, we can fairly assume that Toyota, Honda, etc. will capture the bulk of that missing 25% market share and that auto parts manufacturers across the continent will be humming again.

Besides, the future for GM in the short term (assuming it survives on government largesse) is to essentially rebadge Opel compact cars as Saturns and Chevrolets. How is a "Saturn" Astra designed in Rüsselsheim and assembled in Antwerp any more of a domestic car than a Camry designed in Nagoya but built in Kentucky? Do you think that Opel hunts around for North American-built parts when it assembles Astras for import? Get real.

I was thinking the same thing.

The Big 3 car makers have been in trouble for a while and haven't been able to adapt. $50 billion could just extend an already long and painful death.

It would be great to see them rise again though.

 

[gabe]

The new Dodge Journey is also assembled in Mexico. The Journey replaced Pacifica that was discontinued last year (no one bought it) and was built in Windsor. Getting rid of the Pacifica put over 1000 people out of work at the Windsor plant and a supplier in Guelph closed as well, who knows how many thousands of other jobs were lost. Both my Toyota's are assembled right here in North America.