Automakers: about $35 Billion should do it, or 50B

[cannon_fodder]

Automakers:  about $35 Billion should do it.

The automakers of the USA are now entitled to $25,000,000,000.00 in federal loans to work towards "alternative energy" cars.  That is code for "doing whatever they want."  Essentially no one else wants to throw money on board the Titanic, so the Imperial Federal Government is under the "too big to fail" policy.

GM and Ford are public companies, Chrysler is now a private company.  All three are on board with this plan.  All three have hemorrhaged cash for more than a decade following poor strategic decisions, bad management, and an over compensated union labor force which has driven costs way, way up and a management team that ignored the growing liabilities.  Toyota, Nissan, Mazda, Mercedes, Volkswagen and other (read: profitable) companies with US offices, sales forces, mechanics, and manufacturing plants are not included.  Nor are several smaller independent manufacturers (Tesla being a prime example if they are really interested in alternative energy and not a handout).  

Now, the "merger" of GM and Chrysler is to be subsidized to the tune of $10,000,000,000.00 in loans, equity infusions, guarantees, and handouts.  For reference, you could buy GM in it's entirety this morning for less than $3.5Bil, and Chrysler was purchased for about $7Bil last year.  So, both companies together are worth ~ $10.5B, but tax payers are going in for $10Bil?  Makes sense...

Predictably, he $3 BIL in pension obligations the two have racked up will also be sloughed  off on tax payers.  Poor management, poor negotiations, and poor long term planning has set this up since the 1970's.  Why should I have to fix it?

I want a strong manufacturing base in the United States.  I understand that it will never be at the down and dirty level it was and that as a post-industrial nation our industry must be focused on skilled positions.  I also appreciate the HUGE impact the auto industry has on everything from mining to engineering to shipping.  

BUT, propping up failed companies is a drain on the entire economy.  It stops better companies from entering the market.  It encourages inefficient legacies to continue to lose money.  If a different company, foreign or domestic, can make a better product and do so more profitable – then they have earned the supremacy.  Consolidation can encourage efficiency, but in this instance the Big 3 have swallowed up all domestic competition, gotten complacent, and subsequently ceased to compete.

They should be allowed to die off.  I would support a mitigation program to chop away assets, allow the companies to break up (Pontiac an independent company again), or otherwise to prevent total chaos.  But throwing three times the market value of the companies in the pot to keep it fro boiling dry is a very poor decision fiscally, economically, and on principle.  Certainly encouraging two bad companies to join forces to be one, definitely too big to fail, company will only have a band aid effect.

Daimler-Benz bought Chrysler to turn it around and fled taking a huge hit.  Cerberus bought it thinking they could turn it around and now have their hand out.  Uncle Sam is going to do better?  If a well run company (Daimler) could not merge with Chrysler successfully, how will two failing companies someone succeed?  Let them die.  

http://www.cnbc.com/id/27409944

Full disclosure:

I own a direct stake in Ford.  It was a great buy at $10, an amazing buy at $5, and now for $3 must be a real steal.  Through mutual funds I'm sure I have a stake in GM and several foreign auto makers.  I would personally benefit from a Ford being given a boast and bought the stock thinking that would happen.  But for the economy as a whole, it is still a bad idea.

[Conan71]

The Big Three have known alt fuel vehicles were going to be their future for some time (at least since the OPEC disaster of the early '70's).

They have squandered profits, opportunity, and time to be leaders in hybrid and other alternative technology.  Develop and sell products people want and you will prosper.  Fall behind and piss away opportunity to be pro-active and you will and should shrivel up and die.  Don't expect people for whom you did not make useful products to come bail you out.

"Too big to fail" is a ****ty concept.

[sgrizzle]

Daimler cut Chrysler as soon as it started to turn around because Daimler stockholders knew their company was profitable without Chrysler. The management at Cerberus is looking for a hand out but they have made a whole lot of changes to turn the company around including removing duplicate and low-selling models (something GM doesn't understand) beefing up service offerings and simplifying the dealer franchise offerings as well.

While I would say Chrysler may be making some of the best decisions, GM is making the worst. They are operating in 2008 the way they operated in 1998 and expect our help. GM's product offerings are more bloated than Ford an Chrysler combined. I counted 96 vehicles on GM's website, excluding chassis cabs and commercial-only models. I'm not counting different trim packages either, they list NINETY-SIX vehicles! Chrysler has 29 and I haven't counted Ford yet but I bet it's less than 70.

[Renaissance]

Concur.

[waterboy]

Agree as well. The big three could limit their offerings to three vehicles apiece plus commercial trucks and manage to meet customer demands quite well. They did it up through the 1970's.

However, there will be a serious price we all pay if we stand by and watch as one or more of the big three die off. They each use tons of suppliers and contract work. If we're going to stick our fingers down our throat, we better have a paper bag ready and waiting.

[Conan71]

quote:Originally posted by waterboy

Agree as well. The big three could limit their offerings to three vehicles apiece plus commercial trucks and manage to meet customer demands quite well. They did it up through the 1970's.

However, there will be a serious price we all pay if we stand by and watch as one or more of the big three die off. They each use tons of suppliers and contract work. If we're going to stick our fingers down our throat, we better have a paper bag ready and waiting.

Honda, Toyota, Nissan, etc. all have a successful business model with their U.S. plants using U.S. suppliers and ostensibly keeping the workforce happy without insane union contracts which are finally helping to break the backs of the B-3.  

Seems like two or three years ago, it was reported that for every current GM employee, the company was providing pension and benefits to three retirees.  Not saying retired people should not be taken care of, but when people can retire fully-vested after 20 or 30 years, that creates a high burden on employers, especially with increasing life-expectancy.

Should any or all of the big three fail, any or all of these better-run companies can fill the void.  I'd hate to see any of them fail, but if they fail to adapt and produce what the consumer wants or needs at a competitive price, it's time for their life-span to come to an end.  The Gov't shouldn't be propping them up nor subsidizing their lack of planning for this day.

[bokworker]

It strikes me that the Big 3 automakers are our national economy in microcosm.... big promises made, and yet not funded, when business was good and now they can't be funded. The demographics that thet now face are eerily similar to the demographics of the nation as a whole in the not too distant future....

[TheArtist]

We really are doing the same thing those automakers are doing. Putting most of our eggs in the "automobile" basket, building more and more roads, sprawling and becoming less efficient, and thus less competitive on the world stage. Building ever more roads and bridges, "inneficient products" while not investing as much in efficient transportation options...while watching the investment, the infrastructure previous generations built decay and fall into ruin. Havent wanted to spend the money to keep up the older stuff we already have, keep expanding and spending more on inefficient stuff that we will also have to spend money on to maintain, aaand are spending too little on more efficient forms of transportation and growth. Its just absurd the choices we have made and continue to make. Wonder how long we are going to keep at it?

Wasn't it Churchill that once said something to the effect of, "Americans always do the right thing... after they have tried everything else first." lol

[cannon_fodder]

NO, HELL NO.

Now they want $50,000,000,000.00 from the Federal Government:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aWj2UUIE4ofU&refer=worldwide

They are also seeking about $50,000,000,000.00 from the EU.

Ignoring the $50BIL  from the EU and the $20Bil or so we have already GIVEN them, what, in the hell, is the time frame for paying back the loan?  None of the three make money.  Have they made $50,000,000,000 combined in the last 20 years?  I doubt it.  

Combined the companies are not worth 50% of that.  25% of that.  American car companies are a damn joke, they build lots of cars and pay for the privilege of building each and every one.  Investors are able to figure that out, so they are trying to fleece the government.  Here are the automakers by market cap:

Volkswagen 204.41B (this is radically inflated as of late, usually head to head with Toyota)
Toyota Motor Corporation (ADR)    107.42B
HONDA MOTOR CO., LTD. 42.19B
BMW 42B
Daimler AG (USA)    33.37B
Volvo 20.6B
Nissan Motor Co., Ltd. 17.86B
Renault SA (French)       5.97B
ISUZU MOTORS LIMITED (private est.) 5.2B     
Ford Motor Company 4.57B
Chrysler 3.2B
GM 2.8B
Tata Motors Limited (India) 1.70B
Avtovaz (Russian)~1.4Bil (estimate from 600 - 4bil, Russian companies are strange)

If we are going in for $50Bil we should get Ford, Gm, Chrysler, Nissan and Volvo outright.  Loans?  Who the hell gets a loan for 5 times your market value?   GM has a -57 BILLION market cap.  WHAT!  What the hell are we buying/loaning into?  They have a book value of NEGATIVE 57 BILLION, a market cap of 3Bil, and they don't make any money.

Seriously, half their value is presumed on the notion that the government will save them anyway.  There is no real value there.
- - -

Anyway, the US Auto industry got in a world of trouble.  They ran the show as they saw fit.  From government policy, to union contracts, to what the consumer wanted.  They ran it.  And they ran it into the damn ground.

Sorry, welcome to capitalism.  It's a two way street.  You profit on the way up, but must be allowed to FAIL.  Other companies are using your labor and producing products for your market under the laws you set in place, and are kicking your donkey.  You failed in every imaginable way.

Please either turn it around, or die quietly.  


           

[HazMatCFO]

Sorry, the US Government cannot continue to bailout every company that fails.

Poorly managed companies need to fail, so better managed ones can pick up the slack. It's painful, but in the end, the consumer will be better off.

[sgrizzle]

No, they are not "failing" that bad other than by their own fault and it's GM that is failing the hardest and they want us to help them grow?

____ them and the horse they rode in on.

[HazMatCFO]

GM's CEO said the words Total Liquidation yesterday if GM doesn't get help.

I equated that to failing as a company.

[inteller]

great, I'll take 7 corvette's for a dollar.

companies that simply give up and make bull**** comments like that are not worth keeping around.  

trust me, SOMEONE will buy up the assets.  i dont want to hear about the hundreds of thousands of jobs lost....successful companies still need capacity and I bet there are lots of european companies that make good vehicles DYING to get a nice factory on american soil.

[TheTed]

It's capitalism, and if we're committed to capitalism we have a duty to let them fail.

Toyota plants in this country treat their employees very well. Because of that there's a very high demand level for jobs at American Toyota plants.

Assuming we still need to buy cars, the demand will be filled by someone, most likely someone producing cars in the U.S.

I don't see the big loss if GM fails and Toyota/Honda pick up the slack. They're still gonna make the cars in the US, and they'll be much better cars made under a much better business model.

I'd be very interested to know what percentage of cars bought in the US are made in the US and how different american and non-american brands compare in that regard.

[TheArtist]

quote:Originally posted by inteller

oh puh-lease....you drive a murano with a VQ35DE....lets not preach about efficiency.

the sooner Chrysler and all of its turd vehicles go away, the better.

Why not lol? I dont recycle, but I know its the right thing to do. I know its good to work out and exercise, but occasionally I slack. I do manage to eat well. I am not perfect and push myself to try and be better. I harp on myself for my bad choices far more than I do anyone elses, trust me.

But lets take the Murano as a case in point. The economy is slowing down and I know danged well that as an artist, its likely to hurt me more than most. That Murano aint cheap, nor is the insurance and gas etc. So if I have to make more money than my competitor does in order to get around, It could likely make me less competitive price wise. And or make it so that I have less money to spend locally.

However, I do want to say that I got rid of my old Ford Econoline van which got around 14mpg at best, and now use the Murano as my work vehicle as well. Its one of the reasons I got the Murano. Believe it or not I can put 3 levels of scaffolding plus a ladder, plus paint and other supplies in the thing. She is my heavy duty, stylin, work truck. [8D] I do keep thinking of what the options would be if I were to get something cheaper that could both look sharp to drive around as a daily vehicle, and would be able to haul my stuff?