car_guy

Big Three Endure Public Flogging - Government Finally Gets it Right

This brings up another good point. How can the ratings agencies constantly downgrade the US 3 manufacturers driving up their costs & making them uncompetitive (you notice only Toyota is offering 0% financing, with GM's credit rating how could they afford it) while rating derivatives they don't even understand AAA. Isn't a lack of understanding the very definition of risk.

This sounds like market manipulation 101. Put high ratings on the products your customers, the investment banks, want to sell and downgrade everything else. After being so incredibly wrong, why does anybody care what Moodys/S&P/etc rate anything at?


On Dec 07 02:47 PM James Wilson wrote:

> I can see what Buffet means now. Each Derivative split into hundreds
> of small pieces with the total profit broken into even more Derivatives
> then sold in a package at full value as AAA paper.
>
> The same thing Enron was doing by dividing the risk then packaging
> the longterm profits as a short term gain.

Big Three Endure Public Flogging - Government Finally Gets it Right

Mr. Newman's article raises very good points. The Wall Street firms never even had to testify for their gifts. Their money is not even a loan. The $300B for C is to cover the losses on bad debt. That is all taxpayer $ down the drain. Their remaining $50B is in "equity" which I put in quotes since this already exceeds their market cap. I also have not heard Congress demanding that Pandit cut his pay to $1 and sell all of their perks. I did not even hear any uproar when AIG spend $500M of taxpayer money for trip to Europe to "reward" their top executives for their performance this year.

TenQ - the gifts to the financial community are not a 1 time deal. We have been here before with the savings & loan crisis, the huge infusion of capital after the '88 crash, the huge infusions of capital at the begininng of this year, and AIG has already gone back to the well 2 months after their original loan for another $70B and a huge cut in their interest rate. This was after wasting almost 1% of the original amount on the executive vacation. GM/F/C were not interested in government loans until the banks tightened credit so much that ALL US auto sales, foreign & domestic, dropped over 30% the last 2 months to levels that no car company can run at for long. If the financial institutions that caused this mess took some of the $7 TRILLION in government money they received and actually used it to provide consumer credit, the US 3 would not be in Washington.

The UAW, of which I am neither a member nor a fan, finally took their lumps last year and conceded to a contract with lower wage benefit levels for new workers and moving the health care & retirement liabilities off the companies books & into a VEBA. That is why they keep saying they will be at parity with Toyota/Honda/etc in 2010.

The Financials, the Automakers, and the Call That Cramer and All of CNBC Got Wrong

Apparently Andy believes that the US 3 should have avoided investing in high profit margin products with superior brand names that consumers were clamoring for and instead invest all of the $ in low margin vehicles that consumers were not buying (Honda Civic & Accord sales were down significantly until gas hit $4) and where their competition had superior brand names. If the US 3 had taken Andy's advice they would have gone under years ago.

The US 3 invested heavily in trucks because they still had a superior product that consumers wanted and they intended to keep it that way. They learned their lesson in the '80s when they lost their lead in mid size sedans with bad product. If this strategy is the result of bad management, why did Toyota build 2 large truck/SUV plants in the US in the last couple of years?

What Andy is too lazy to understand is that the US 3 produce a full line of products, including high mileage small cars, (many like the Malibu are very competitive with Toyota and Honda) but their highest margin vehicles are the trucks and SUVs. The only reason Toyota and especially Honda were not hurt as badly with the switch from cars to trucks is becauase they were minor players in the truck market so they had very little to lose.

Go sell your Liar Loans Andy. I heard on the Street that people who can't pay won't default if you charge them a higher interest rate.