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  1.    #1  
    After decades of being the dominant industrial force in the american economy, GM (and the other big 3 auto makers) are in trouble.

    Big trouble.

    Some will say that its trouble which they brought upon themselves. That it (and they) for decades resisted efforts to raise the fuel economy standards on the fleets of vehicles it sells -- arguing that this would disproportionately hurt it (and other american car makers) which made most of their profit from SUVs and pickup trucks. GM gratuitously and mindlessly killed its highly successful and popular EV-1, and conspired with other auto and oil companies to repeal the California Zero Emissions mandate (ZEV), which was the force behind the development of the EV1 and other electric cars -- just before the onset of a new energy crisis.

    That GM and the other american auto companies have long used their favored position in the american political system to oppose regulations that would have benefitted the country long term even if they could have hurt their profits in the short term.

    That they and their unions agreed to unsustainable health and benefit contracts that raised the cost of american cars disproportionately compared to foreign made cars.

    That its work force is old and inefficient -- that instead of firing unneeded workers, it often pays them to sit and read newspapers in a "job bank".

    That instead of leveraging its profits made from its years of making those big Hummers, trucks, and SUVs and designing and producing efficient, competitive, and desirable vehicles like the hybrid Prius, GM and the other american car companies laid back and milked those profits for the benefit of its shareholders, over paid workers, and greedy executives.

    That to a large extent, the car business for these companies has for decades been little more than an appendage to their far more profitable financing divisions. Divisions like GMAC (General Motors Acceptance Corp) that loaned consumers the money to buy cars (and eventually even homes mortgages), made more money often times than the production of vehicles.

    Conservatives will argue that unlike biology, capitalism is one place where Darwinism should apply: that in business it should be survival of the fittest.

    That if GM and the other auto companies can't make it, they are at fault and they should bear the wretched consequences.

    Conservatives will argue that Japan artificially kept many large enterprises afloat during its "lost decade" in the 90's -- and that this contributed to Japans moribund condition during that decade.

    The alternate view is not ideological, not vengeful, not sentimental -- but practical.

    That GM and its fraternal car companies employ millions -- not just directly themselves -- but through a cascading web of subcontracting suppliers, dealers, and dependent 3rd party companies.

    That at a time of economic fragility the worst thing possible for the economy as a whole would be to put millions more people onto the unemployment rolls.

    That aside from their being unprepared for the changing consumer environment brought on by the raised cost of oil, they are not themselves directly at fault for their troubles. junior’s cratering economy has affected all businesses -- but a business that caters to the delayable purchase of the second biggest of people's expenditures, is most vulnerable of all.

    Much of the car business over the last decade or so was based on leasing -- an indirect way of financing a vehicle, that determined cost based on a projection of the final residual value of the car at the termination of its lease. The meltdown in the economy and the change in what cars are desired, has overturned most of the presumptions that underlaid the whole leasing equation.

    As a result car companies are getting vehicles back from leases that are worth far less than anticipated, and which they must then sell at a major loss. Unsure of the future, Chrysler specifically has completely stopped leasing.


    But most particularly, the car companies are being bankrupted by something that they are not responsible for: the crisis in the credit markets.

    To make an expensive purchase like a car, buyers need loans. Currently potential car buyers can neither get an affordable loan, or often times, any loan.

    To stock their car lots, to sell what the car companies offer -- dealers need to finance the acquisition of their inventory. Because of the credit crisis, dealers cannot take from Detroit the cars Detroit has manufactured.

    The auto companies financing crisis is a direct product of the mortgage/securitization meltdown -- one that got immensely deeper and more opaque after the insane dissolution of Lehman Brothers -- which absolutely paralyzed the already crippled credit markets.


    GM and the other american car makers now face 6 major problems:

    • They pay far more than their foreign competitors toward their current (and retired) worker's health care.

    • They pay far more than their foreign competitors in salaries.

    • Their workers are older and less flexible.

    • Their car fleet offerings are mostly not relevant to what people want to own now. (i.e good MPG cars.)

    • Their system of financing the purchase of what they produce has completely broken down.

    • the car companies are forced to pay much higher rates for what credit they can get because potential lenders see them (understandably) as big credit risks.



    If even one car company goes bankrupt Michigan and the rust belt Midwest would be absolutely destroyed. And its highly unlikely that it could be stopped at just one bankruptcy. The probability is that it would be liable to cascade to include them all (since as in the airline industry, the dynamics of the industry structure compel even the strongest company to follow the weakest).

    It would be impossible to isolate the destruction to one state, one region -- to just allow the rust belt to revert back into the Great Plains.

    Inevitably the damage from the demolition of these great enterprises would cause shock and liquidation far from Detroit.

    Though the abusive securitization of mortgages and housing is at the root of this current economic crisis -- people with jobs are the only thing preventing this meltdown from irrevocably becoming The Great Depression: The Sequel.

    I am scared -- and I don’t even own a car.


    (If you want a different perspective on this, I have posted onto youTube CNBC's Cramer describing what ...)
    Last edited by BARYE; 11/18/2008 at 12:23 PM. Reason: many typos corrected
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  2. #2  
    Quote Originally Posted by BARYE View Post

    GM and the other american car makers now face 6 major problems:
    • They pay far more to their foreign competitors toward their current (and retired) workers health care.
    • They pay far more to their foreign competitors in salaries.
    • Their workers are older and less flexible.
    • Their car fleet offerings are mostly not relevant to what people want to own now. (i.e good MPG cars.)
    • Their system of financing the purchase of what they produce has completely broken down.
    • Because potential lenders see them as (understandably) a credit risk, the car companies are forced to pay much higher terms for what credit is made available to them.


    If even one car company goes bankrupt Michigan and the rust belt Midwest would be absolutely destroyed. And its highly unlikely that it could be stopped at just one bankruptcy. The probability is that it would be liable to cascade to include them all (since as in the airline industry, the dynamics of the industry structure compel even the strongest company to follow the weakest).

    It would be impossible to isolate the destruction to just one state, one region -- to allow the rust belt to revert back into the Great Plains.

    Inevitably the damage from the demolition of these great enterprises would cause shock and liquidation far from Detroit.

    Though the abusive securitization of mortgages and housing is at the root of this current economic crisis -- people with jobs are the only thing preventing this meltdown from irrevocably becoming The Great Depression: The Sequel.

    I am scared -- and I don’t even own a car.


    (If you want a different perspective on this, I have posted onto youTube CNBC's Cramer describing what ...)

    I agree with most of what you've posted here. However, I'm not hearing a lot of ideas from any of the pundits right now. While I think it is important to understand how we got into this mess, I also think we need to be discussing ways out of it. I'll also add that I keep hearing everyone talking about Obama and GM, etc. as though he can do much of anything in the next 2 months. Bush needs to lead while he is still the POTUS and not sit back waiting for the new guy to come in to be the fall guy.

    That said, here are a few of my thoughts on what they should do to save our auto industry:

    1. Any bailout/loans need to have heavy consequences to the auto makers. I want to see something very radical done in terms of oversight, MPG requirements, cutting executive ranks and pay and matched by the unions, etc. Specifically -
    • Any loan/lien granted the car companies will result in board level representation - make that bipartisan (1 Dem, 1 Rep) - to represent the tax payers. Change in Detroit starts at the top - the tax payer must have a say in corporate governance. While 2 board seats won't allow for control over the board, it will offer influence and insight where it is needed most. You cannot save a ship from sinking if you allow her to continue to be steered right into a bunch of icebergs.
    • Force the car companies to cut and cut some more - signficant cuts amongst the white collar ranks before they cut any new labor deals with the unions. Any loans given them cannot be used to sustain the current bureaucracy, salaries, union contracts, etc.
    • Create generous corporate tax credits for high MPG cars and even more for those that use natural gas and/or alternative fuels.
    • Possibly create an X1-like reward for the industry with cascading rewards based on whoever hits certain objectives, such as the first car to go 100 MPG on 1 gallon of gas (elec/gas hybrid) or the first to produce a car running on natural gas, etc.
    2. Probably equally important, if not more so, is to offer incentives to car buyers some how RIGHT NOW. We all heard that the credit markets were frozen and that the $700B bailout was needed to unfreeze them. Yet, $300B has been dished out, without any oversight, and the banks are hoarding the money. This is inexcusable and needs to be corrected NOW by the Bush Admin. That said, here are some ideas as to what we can do to get people buying cars again:
    • Offer to back a significant portion of car loans/leases (ala SBA loans) via the car companies financing companies (FMC, GMC). If Wallstreet won't help, then I say "f*(k 'em" and we'll help Detroit directly. Any loans/leases must still only be given to qualified and credit worthy buyers.
    • Offer tax payers a tax write offs/rebates for purchases of American made cars. Perhaps a staggering credit depending on the fuel efficiency, hybrid, etc. e.g. $1000 tax credit for ever 10 MPG over 20 MPG and up to 50 MPG max. So if the car gets 20 MPG, the tax payer gets $2,000 tax credit. If the car gets 50 MPG, the tax payer gets $5,000 tax credit. I would open this to foriegn car companies as well, but blatantly give American car companies "first movers advantage" before doing so.
    • A retrofit credit - offer tax payers a tax credit if they have their car retrofitted (at their cost) to improve MPG. Retrofitted to what? Dunno...I'm not a mechanic and aren't up on the options to be candid. But if, for example, a car could be retrofitted to burn natural gas instead of regular/unleaded gas, then I'd like to see bold action to incentivize the American public to retrofit their cars.
    Of course there is the broader discussion of how the car companies fit into the energy plan that Obama will inevitably develop, but there can be some things done now with the foresight that we will be moving aggressively away from foreign oil. The car companies must be pushed - if by force - into this new paradigm and it seems to me that we have a lot of leverage over them right now since they've about run out of gas (pun intended).

    Overall, I do NOT support a $25B check to Detroit unless I see radical...and as you can see above I mean RADICAL...conditions, contraints, and oversight that all help to enable both the car companies and their customers to move into the paradigm of renewable energies and oil independence.
    Last edited by moderateinny; 11/16/2008 at 10:42 AM.
  3.    #3  
    Quote Originally Posted by moderateinny View Post
    1. Any bailout/loans need to have heavy consequences to the auto makers. I want to see something very radical done in terms of oversight, MPG requirements, cutting executive ranks and pay and matched by the unions, etc. Specifically -
    • Any loan/lien granted the car companies will result in board level representation - make that bipartisan (1 Dem, 1 Rep) - to represent the tax payers. Change in Detroit starts at the top - the tax payer must have a say in corporate governance. While 2 board seats won't allow for control over the board, it will offer influence and insight where it is needed most. You cannot save a ship from sinking if you allow her to continue to be steered right into a bunch of icebergs.
    • Force the car companies to cut and cut some more - signficant cuts amongst the white collar ranks before they cut any new labor deals with the unions. Any loans given them cannot be used to sustain the current bureaucracy, salaries, union contracts, etc.
    • Create generous corporate tax credits for high MPG cars and even more for those that use natural gas and/or alternative fuels.
    • Possibly create an X1-like reward for the industry with cascading rewards based on whoever hits certain objectives, such as the first car to go 100 MPG on 1 gallon of gas (elec/gas hybrid) or the first to produce a car running on natural gas, etc.
    2. Probably equally important, if not more so, is to offer incentives to car buyers some how RIGHT NOW. We all heard that the credit markets were frozen and that the $700B bailout was needed to unfreeze them. Yet, $300B has been dished out, without any oversight, and the banks are hoarding the money. This is inexcusable and needs to be corrected NOW by the Bush Admin. That said, here are some ideas as to what we can do to get people buying cars again:
    • Offer to back a significant portion of car loans/leases (ala SBA loans) via the car companies financing companies (FMC, GMC). If Wallstreet won't help, then I say "f*(k 'em" and we'll help Detroit directly. Any loans/leases must still only be given to qualified and credit worthy buyers.
    • Offer tax payers a tax write offs/rebates for purchases of American made cars. Perhaps a staggering credit depending on the fuel efficiency, hybrid, etc. e.g. $1000 tax credit for ever 10 MPG over 20 MPG and up to 50 MPG max. So if the car gets 20 MPG, the tax payer gets $2,000 tax credit. If the car gets 50 MPG, the tax payer gets $5,000 tax credit. I would open this to foriegn car companies as well, but blatantly give American car companies "first movers advantage" before doing so.
    • A retrofit credit - offer tax payers a tax credit if they have their car retrofitted (at their cost) to improve MPG. Retrofitted to what? Dunno...I'm not a mechanic and aren't up on the options to be candid. But if, for example, a car could be retrofitted to burn natural gas instead of regular/unleaded gas, then I'd like to see bold action to incentivize the American public to retrofit their cars.
    Of course there is the broader discussion of how the car companies fit into the energy plan that Obama will inevitably develop, but there can be some things done now with the foresight that we will be moving aggressively away from foreign oil. The car companies must be pushed - if by force - into this new paradigm and it seems to me that we have a lot of leverage over them right now since they've about run out of gas (pun intended).

    Overall, I do NOT support a $25B check to Detroit unless I see radical...and as you can see above I mean RADICAL...conditions, contraints, and oversight that all help to enable both the car companies and their customers to move into the paradigm of renewable energies and oil independence.

    I agree with much of what you wrote.

    The timing of this whole crisis is more than a little awkward -- during junior's last days, and well before Obama can either take power or have his government up to speed.

    Are the car companies truly on the verge of genuine bankruptcy -- or are they pressing especially hard NOW -- because they think they can get a better deal from junior and the rump congress than from the new one ??

    I honestly don't know.

    But if one them actually fails, I do know that the consequences of that are almost unfathomable.

    Ultimately the health and strength of these companies is dependent on the health and strength of our economy -- no matter how much aid is given to them, no matter what MPG cars they produce -- if people are losing their homes, their jobs -- they're not going to spend 20-40K buying a new ride...
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  4. #4  
    Should GM be saved?

    No.
    No problem should ever be solved twice.

    Verizon Treo650 W/Custom ROM
  5.    #5  
    Quote Originally Posted by DL.Cummings View Post
    Should GM be saved?

    No.
    NO ???!?!!??!!????!

    That's your answer ??????????

    Do you have ANY idea of the consquences of a GM bankrupcy ??

    That answer is just about the same as junior's when faced with doing something to save Lehman Broth. -- WTF -- let them liquidate ...

    Though maybe with possibly more understanding of the consequential implications (I hope...)
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  6. #6  
    Quote Originally Posted by DL.Cummings View Post
    Should GM be saved?

    No.
    LOL. I admire your brevity.

    Actually, since I doubt Pelosi and Reid can put anything together that makes sense in the lame duck session, I tend to agree with you.

    That said, I'm curious to know what you think will happen if GM goes down?
  7. #7  
    Yes, they should be saved but the entire administration should be fired, they should have been cleaned out 25 years ago.
  8. #8  
    Quote Originally Posted by moderateinny View Post
    LOL. I admire your brevity.

    Actually, since I doubt Pelosi and Reid can put anything together that makes sense in the lame duck session, I tend to agree with you.

    That said, I'm curious to know what you think will happen if GM goes down?
    Ultimately? Companies might get the hint to start being a bit more responsible (of course government involvement doesn't help either).

    I've read or heard somewhere that 1 in 10 jobs in the US are directly related to the auto industry . . . and I'm sure that GM going under will hit hard. It's the end result I am looking at and not the immediate.

    Will it hit hard? Sure, but the question really is: Will we stay down?

    I think not . . . and companies need to know that if they are not responsible we will let them burn down (so to speak).
    No problem should ever be solved twice.

    Verizon Treo650 W/Custom ROM
  9. #9  
    Quote Originally Posted by DL.Cummings View Post
    Ultimately? Companies might get the hint to start being a bit more responsible (of course government involvement doesn't help either).

    I've read or heard somewhere that 1 in 10 jobs in the US are directly related to the auto industry . . . and I'm sure that GM going under will hit hard. It's the end result I am looking at and not the immediate.

    Will it hit hard? Sure, but the question really is: Will we stay down?

    I think not . . . and companies need to know that if they are not responsible we will let them burn down (so to speak).
    Truthfully, I'm more fearful of GM falling into the hands of the Chinese than I am it becoming the calamity that many are predicting. I'm not sure that it will completely collapse even if and when they go BK - but in this economy, nobody can really tell much of anything anymore.
  10.    #10  
    I have posted (and others) in regard to rescuing GM.

    Many of you might be surprised at how often our views align...


    (it runs over 9 minutes, but is worth watching)
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  11.    #11  
    Quote Originally Posted by DL.Cummings View Post
    Ultimately? Companies might get the hint to start being a bit more responsible (of course government involvement doesn't help either).

    I've read or heard somewhere that 1 in 10 jobs in the US are directly related to the auto industry . . . and I'm sure that GM going under will hit hard. It's the end result I am looking at and not the immediate.

    Will it hit hard? Sure...companies need to know that if they are not responsible we will let them burn down...

    "I'm not saying we wouldn't get our hair mussed!..."

    The comments made by George C. Scott's General Turgidson in "Doctor Strangelove" -- describing the prospective consequences of a global thermonuclear war.
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  12. #12  
    I think we should save them...

    We don't want to depend on other countries for our transportation (and the tech associated with those businesses).

    The result of them filing chap 11 (and more than likely chap 7) would be devastating.

    I see some saying they should "go" but those are the same people who will put 100% of the blame on obama when the economy kicks the bucket.

    Sorry, but it makes no sense to allow them to fail... but I agree a bailout should come with restrictions....
    01000010 01100001 01101110 00100000 01010100 01101000 01110010 01100101 01100001 01100100 00100000 01000011 01110010 01100001 01110000 01110000 01100101 01110010 01110011 00100001
  13.    #13  
    yup.

    Chapter 7 -- which is liquidation.

    All the "Smart" people are saying let them go bankrupt, let them reorganize, let them renegotiate their union contracts, redo their dealer networks, do away with redunantcies etc etc.

    Idiocy.

    Who will lend them debtor in possession financing ?? Will car buyers already skittish car buyers want a GM car if they're bankrupt, and maybe not around to sell parts, to support their warranty ??

    Pension and health insurance obligations will need to be taken over by the Federal government at the cost of billions.

    Instead of genrating income, taxes, and business for millions of 3rd party enterprises -- a defunct GM and its former workers will be absorbing billions in taxes, unemployment insurance, and grievous hardship.

    The cascade of dominos will knock down the entire economy -- double the already disastrous calamity that was the "neccesary" liquidation of Lehman Bros.

    A genuine depression may soon be now longer avoidable ...
    Last edited by BARYE; 11/18/2008 at 11:55 AM.
    755P Sprint SERO (upgraded from unlocked GSM 650 on T-Mobile)
  14. #14  
    Quote Originally Posted by BARYE View Post
    All the "Smart" people are saying let them go bankrupt, let them reorganize, let them renegotiate their union contracts, redo their dealer networks, do away with redunantcies etc etc.

    Idiocy.
    More like the "smart" republicans. They know if one of the big 3 go under, obama would spend the next four years trying to fix the economy. I doubt if we would recover in four years.

    Do we really want to live in a world in which we are totally dependent on japan and europe for our cars?

    Of course the uaw needs to back down... if not eliminated.
    01000010 01100001 01101110 00100000 01010100 01101000 01110010 01100101 01100001 01100100 00100000 01000011 01110010 01100001 01110000 01110000 01100101 01110010 01110011 00100001
  15. #15  
    Quote Originally Posted by theog View Post
    Do we really want to live in a world in which we are totally dependent on japan and europe for our cars?
    From a car perspective that is not such a bad prospect...
    American cars are generally pretty outdated compared to european an japanese/asian cars...
    I drive a latest model Saab 9-5 which was build under ownership of GM and I have to say that the build quality is pretty poor in places, while Saab used to be known for its quality..

    But on a global economical level the impact of GM going down is a pretty scary thought...
    A reorg in the US car industry is in order but a bust and rebuild may not be the best way to do it...
    <IMG WIDTH="200" HEIGHT="50" SRC=http://www.visorcentral.com/images/visorcentral.gif> (ex)VisorCentral Discussion Moderator
    Do files get embarrassed when they get unzipped?
  16. #16  
    I havent had time to read this whole string so my apologies up front if some of this has been covered... (I promise to read it tonight when I get home)

    My beef is this... It ALL comes back to oil and mortgages. With the increase in fuel prices this put a HUGE crunch on the fragile mortgages that were lent... @ $4+ a gallon is when all this chyt hit the fan. Its when all the mortgages went bad thus creating an incredibly vicious cycle...

    I say (sort of tounge and cheek sort of not) have big oil bail them out....

    If we are to bail them out and give them loans there has to be bench marks...

    MPG benchmarks
    CO2 benchmarks (both in their vehicles and their manufacturing plants)
    ... this would apply to all their suppliers as well
    Lower their cost of labor ... I like the idea of having political representation on their boards

    Our dependance on foreign oil is the root of most of these problems... it sickens me that the big 3 have been in cahoots so long with big oil at the peril of our country and now they have the hangemdowns to come to the very country they have been crippling for a hand out with out strings....

    no thanks.

    its either take these conditions or suffer like the rest of us.

    Usually in a business when times get tough its the owner that takes it on the chin and tries for as long as they can to keep the workers happy, it seems to be the reverse with these baffons.

    Sorry im ranting and some of its just rambles but hopefully im making some points.

    enjoy.
    ONE can be spelled as NEO.
    There is no spoon.
  17. #17  
    Not to mention how pissed I am that now that the gas prices have started to come down some that Ford has the audacity to push the F-150 so hard lately. As well as Dodge and the Ram...

    ARE YOU KIDDING ME?

    Gas guzzlers that got us in this mess to begin with. The cycle of the oil addiction that the big 3 has, has already started over!

    Case in point... Ford F-150.

    Were they pushing these commercials when gas was $4+? No, they were pushing the focus and the edge. Good gawd.

    They are reactivly advertising instead of proactivily pushing for the breaking of the addiction.

    Go get your loans from big oil who just had their biggest quarter of profits of any company on record in history.
    ONE can be spelled as NEO.
    There is no spoon.
  18. #18  
    Quote Originally Posted by Hdhntr23 View Post
    Case in point... Ford F-150.

    Were they pushing these commercials when gas was $4+? No, they were pushing the focus and the edge. Good gawd.

    They are reactivly advertising instead of proactivily pushing for the breaking of the addiction.
    Dumb companies . . . next thing you know they'll be marketing to us based on what they've found we like . . .
    No problem should ever be solved twice.

    Verizon Treo650 W/Custom ROM
  19. #19  
    Ok DL,

    I have to ask, are you being sarcastic towards me or towards them? If its towards me, Ill retort, if its towards them
    ONE can be spelled as NEO.
    There is no spoon.
  20. #20  
    It is a tough call. Free market capitalism's problem is that its quantum effects cause swings that most of the polity agrees should be ameliorated. So you have a tension between democracy and the efficiencies of capitalism. Another problem is other countries can prop up their businesses, which in heavy industry take a long time to grow, thereby giving an advantage when economies pick up again.

    I do think car production in the US has become an unsustainable and its efficiencies have been artificial for decades. So it makes sense to let it die. But it is going to hurt like the dickins. The huge swell of unemployment from problems in many sectors is out there relentlessly approaching -- we haven't even seen it yet. It will be a tsunami.
    Last edited by aero; 11/18/2008 at 08:14 PM.
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