k9s-4-k8

GM and Chrysler: Why's Bankruptcy So Expensive?

Let's face facts here. They have already seen a large dropoff in sales and have already set themselves up to request more and more at a later date because they're tieing everything to whether they see sales pick up in 6 or 8 months. That means they will keep the meter running through this slow period while on the taxpayer's dime leading to many tens of billions of taxpayer infusion which they will later point to as loss if we don't cough up more. It will be presented in a more diplomatic way of course, but the end result will be the same. So, bankruptcy tommorrow is the cheapest and best option. Additionally, if one was to pick a time to fundamentally restructure a company it should be when the economy sucks anyway so long as the government agrees to infuse capital after the bankruptcy filing.

GM May Be Considering Bankruptcy (at Last)

I agree with the 1 in a million chance,...... but that they WON'T give them more money. Put another way its a million to one that they fund them. I don't agree with it, but I'm absolutely certain beyond a shadow of a doubt that the Obama administration and the majority in Congress will fall all over themselves in coughing up whatever is needed, whether it be 5 million till the end of the quarter or much larger sum I'm not sure. Eventually, it will be a much, much larger sum and they will come back for more after that too. This is all politics and support of your supporters no matter what. The UAW knows this, the contract vendors know this, bond holders know this and GM management knows this. Only the dude that authored this blogopinion doesn't realize this.
Its also the reason that the different sides aren't coming to terms. Uncle Sam will pick up the tab.

Why Capping Pay Is Likely to Work

I think we should learn from the Obama admin and push for milestones for Congress to cut wasteful spending, and achieve a balanced budget by some time in the future or face a 50% cut in Congressional pay. They get paid $174,000 a year both Congress and the Senate with leaders receiving a bit more. They get automatic cost of living increases and the best medical/dental/ retirement plan available for a short stint in national politics. They built the embedded moral hazard into the mortgage market that was the foundation to this financial crisis, and yet they get off scot-free as all blame goes to everyone else, who btw are also guilty.

How the Government Should Manage GM and Chrysler

The 3 CEO's can see the benefits of bankruptcy but they also know they will likely be replaced by a disgruntled Congress and administration. That makes this a no go. Instead, they will pursue a Democrat party backstop that will last till Democrats are pushed from power party due to this specific policy in support of these unions. I can see it now. They'll see it after future elections.

If Cars Are the Problem, They Can Also Be the Solution

On Dec 16 11:57 AM groosome wrote:

> Where is the concern for all the people that will be put out of work
> or retiree's who will lose their retirement income , How come nobody
> ever mentions them including the new president. How come you say
> nothing about the est. $2Trillion given to Wall Street whoise greed
> and creative and flawed business practices started all of this.

Well, if we should be concerned about people who's greed as reflected by their agent the UAW, then we should certainly be even more sympathetic for anyone and everyone who has been laid off from a job. Lets provide them all with an unemployment check exponentially higher than what they made with their prior employer. Hmmm...maybe their might be a bit of moral hazard there, but hey isn't that exactly what we have with the UAW and the auto manufacturers? As for Wall street, I agree let them go bankrupt. Unfortunately, unlike the auto manufacturers I already know that if counter party risk might bring down most of the largest banks in the world, industries like the auto manufacturers wouldn't survive anyway along with most any business that ever used any credit in the operation of business. Isn't anyone a small business out there? Is everyone brain dead out there?

If Cars Are the Problem, They Can Also Be the Solution

On Dec 16 12:43 PM jimxyz wrote:

> Jimmy Carter was smarter - - - look where he got us!

True!!! If Jimmy wasn't so inept, we might not have gotten Reagan for 8 years. Thanks, Jimmy-dog!!!

$10 an Hour Pay Gap = Billions of Extra Dollars a Year

On Dec 14 08:48 AM drummerboy wrote:


> ....... you may still be in the dark ages with the mentality
> that labor is cheap, or should be cheap,hence the reason why the
> civil war was fought. show me one of these foreign car companies
> that establish themselves in a geographical area that is anywhere
> north kentucky. you won't! these car companies that come to this
> country know more about history and demographics in order to get
> the most bang for their buck. remember,it's the south who have NEVER
> had respect for the labor force, chaingangs,civil war,slave labor.
> come one folks, he who blames labor for any type of ruination in
> this country is a fool.blame a working man for working.thats insane.whats
> even more insane is the notion that its a union's fault. wake up
> america. he who has never belonged, or has never gotten their finger
> nails dirty will never understand.time to keep the eye on the real
> ball is now. southern politicians who want to protect the notion
> that labor is only worth 20k a yr., lawyers and insurance companies
> as well. get a clue

What incredible drivel. Does Detroit UAW employees represent an educated work force to anyone? Doesn't Detroit auto say somewhere that if you have a high school education that you're somehow overqualified? I mean, really!
As to the notion that the Unions caused the auto companies to blow up----well, I will heap a bit of scorn on management as well. Management didn't have to sign on to those disastrous UAW contracts starting back decades ago to the current year. I mean they really weren't looking at long-term viability of the industry. The auto industry has huge fixed expenses which they pay whether there is a strike or not and it costs millions per day to sit idle. Ultimately, I think it came down to CEO bonuses. What CEO was willing to forgo their current bonuses for the long term health of the company? Bonuses should have been structured in contract renegotiation year for this fact.
The UAW is faulted for using their considerable leverage in an industry that was beholden to supplier contracts, idled plant labor costs, gold plated healthcare plans, and intolerable work rules. The UAW plan now is to push card check, force foreign transplant employees into the UAW, raise their bottom line, send those jobs out of the country, all supported by taxpayer dollars. As for those loans, they will be either converted to stock or be forgiven.

If Cars Are the Problem, They Can Also Be the Solution

Much to comment on.

Jim Kingsdale says:
"......pay a cash rebate to buyers of super-acceptable models that are produced (assembled, at least) in the U.S."

This is a typical protectionist proposal I expect to hear from the UAW and the Democrat majority in Congress. Cash rebates paid only on U.S. built vehicles bypasses international trade laws.


Jim Kingsdale says:
"A “bridge” loan will still be needed by GM to get them through their current negative cash flow operating structure. But it will be made with the realistic potential of paying off in the future."

The only realistic terms for GM to be relieved of this debt is for the U.S. taxpayer to convert it into a grant, or convert it into equity which will perform only a bit better than a grant.

Jim Kingsdale says:
"Moreover, the government should get options on a huge part of the equity in GM, thus potentially getting the taxpayers’ money back at some point. The company will still need contractual restructuring to eliminate legacy costs that now make it uncompetitive. That means the bailout funds should come in as part of a pre-packaged restructuring that abrogates G.M.’s current legal obligations to its unions, dealers, and suppliers."

Either you're suggesting we receive stock in exchange for a $50 billion infusion to the UAW,(that's the big 3 deal with the UAW and they won't abrogate that deal for anything) or you're just papering over one of the major reasons GM will never survive profitably on their own without an intravenous drip on taxpayer funds for the remainder of this century. Certainly, I don't expect taxpayers will put up with that. We will cut our losses after many billions have already been flushed on this company.

Jim Kingsdale says:
"How do we know a government-controlled GM would be smarter than the old one? We don’t, but we do know two things. One: new management could hardly be dumber than the past management. Two: we’ve just elected maybe the smartest President in history - so giving him the opportunity to pick the people who will make the GM decisions at least provides us with a glimmer of hope. His recent choices for leadership positions should give us confidence in his judgement."

On the contrary, anyone that thinks they can turn around GM without a managed bankruptcy supported with government loans solution, is at least as stupid as the former management. As for Barack Obama being the smartest President in history? He's not even in the top 10. Where do you come up with such crap? Fact of the matter is that GM is suffering under the burden of labor expense due to the combination of greedy unions and greedy management. Nobody cared a whit about shareholders or the long term viability of the company, neither management nor the UAW. Automobile manufacturers are beholden to long-term supplier contracts and fix costs such as interest on debt for capital investment. The unions understand every day they strike costs GM millions. They hold tremendous leverage over the company. Management cares about year end bonuses. Enough days on strike in any year can dramatically curtail profits and leave management with a simple salary and no bonus.

Some Republicans Take Some Semblance of Accountability for Auto Industry Bailout

On Dec 11 12:02 PM Andrew Budd wrote:

> Here is a simple truth - I am a small Chevrolet Dealer in Warrenton,
> VA.
>
> No matter what you think of GM and the auto loans here is a real
> true consequence of GM's demise.
>
> GM owes my business nearly $500,000 that is due to be paid next week.
> That amount is nearly a third of my operating capital - If they can't
> pay, I will layoff 1/3 of my staff within 24 hours.
>
> I will be unable to pay many of my suppliers who will in turn layoff
> many of their staff.
>
> I have stopped advertising with the local paper - they have already
> begun laying off writers, editors, salespeople etc.
>
> This trickle down is gonna get to everyone eventually.
>
> Merry Christmas to you too Mr. Shelby (r) - Alabama

So, what you're saying is 'pay GM's bills for me.'
Tell me now, what is in it for my business. I'm not involved in the automobile industry. I have needs and believe if my needs aren't met, I will have to lay off 1000 people in the next month. What are you going to send me?

Some Republicans Take Some Semblance of Accountability for Auto Industry Bailout

I'm from California where I don't believe we have any auto manufacturing. I KNOW that a prepackaged bankruptcy is in the future for these companies. I'm not saying it will happen now, 2009 or 2010. I'm saying it will happen because they have no plan that is substantially differernt from business as usual. The only other choice is a drip line of continuous taxpayer money every few years to bail out the industry for all of their mistakes in past decades. I don't believe the American people can be fooled more than 2, 3 or 4 times. There is a place where even low brow Americans that don't live in Detroit say, "HHHey!" You're ripping me off! DUH!!!

The Case for Making Bigger Cars

So much misinformation in so many posts. I might as well add my two cents and let you all abuse me too.
Its not that Ford is in such better shape. They just have more of a financial cushion to burn through due to better timing on seeking additional financing before credit disappeared.
Another overlooked fact is that the big 3 have been manufacturing small cars overseas for those markets that have had that demand.
Here in the U.S., the demand for small cars has been dismal for years. It was only with the abrupt change in gasoline prices that demand is changing. Even more important is that because of their much more expensive legacy costs and decades of much higher wages, the big 3 wouldn't have been able to cover those expenses in cheaper economy cars. They couldn't compete in little cars here in the U.S.
Now, for the elephant in the room. They still aren't competitive manufacturing economy cars in Detroit. Nothing has changed.....well actually, nothing has changed with their expenses that will make them competitive. If we just subsidize them going forward, the automobile companies can be more competitive with the Japanese economy cars, the UAW will be happy, and the Democrats in Congress will strengthen their support among union workers. The loser is the American taxpayer. Its not about the 15B. its about the first down payment on the auto companies future heroin habit. It will never stop because they can't survive without it.

Auto Industry Rescue Delays the Inevitable

Krugman published his work 30 years ago. It isn't any new theory. Its not even clear he still believes his earlier work. Nevertheless, he isn't likely to denounce that which got him his prize now. One may wonder what took them so long. Its because his work didn't really deserve a Nobel prize. It was purely a political choice before the U.S. elections where the Nobel prize voters are a roomful of European socialists with a watchful eye on the American elections.


On Dec 10 10:33 AM Fred Banks wrote:

> ........ although he (Krugman) probably knows more than last year's prize winners, whose work was completely and totally without any scientific value, and so they needn't be questioned.

Auto Industry Rescue Delays the Inevitable

i see this car czar as a Congressional marketing ploy to hide the fact that they're totally unwilling to push the UAW to rework their contracts. Part of the congressional/UAW plan may be new expectations with the card check bill. If the UAW can infuse new union dynamics into the domestic based foreign auto manufacturers plans, they might be able to afford the UAW cost structure as it now stands. The mistake in this thinking is to assume that these foreign auto manufacturers haven't learned anything from UAW history and remain in the U.S.

Bailout Watch: Heading for a Populist Backlash?

If its courage that brought Thailand such a heritage of advanced culture and financial dominance as it now has, I vote for fear.


On Dec 09 03:28 PM bosun.j wrote:

> It's a crying shame that Americans don't have the same courage that
> Thai people have. Were that the case the situation we're now in wouldn't
> have ended up plunging the planet into cultural and financial collapse.

'As GM Goes, So Goes the Nation': Let's Hope Iacocca Is Wrong

Come on Matty, tell us what you really think.
Predicting GMs bankruptcy a year ago? What took you so long? I've known for more than 10 years that they would go bk, the only question was exactly when.
What is really needed in this situation is a managed bankruptcy. Managed so as to affirm to some that GM intends to honor certain contracts that will benefit the company, while dishing off what they need to rid the company of. The government should be involved to make sure they stay on course, and especially since they still need our investment money if they want to live again. UAW won't like it one bit, but they don't care one wit about the company beyond making certain their workers are paid. No doubt about it, this will benefit the company and its employees over the long run, while limiting the possibility that taxpayers will be on the hook much as French taxpayers are on the hook for life with Airbus.