It is being reported that GM is going to return two of their leased planes. Not to worry though, they will still have three left to choose from for next month's trip to Washington. Also, it was reported on Ford is exploring selling one of theirs.
Good thing we sold them fords instead of GMC's
I am going against the tide here, but I do think the loan to the automakers should be approved. It's peanuts compared the amount of jobs at risk. The current auto crisis is an outcome of the mess on Wall Street. General Motors would probably have been ok had the credit markets not frozen. This had two disaterous outcomes for the domestic auto makers. It shut off the opportunity to raise capital (Ford leveraged most of it's assets about 18 months before the crisis so it has sufficient liquidity) and the resulting economic downturn caused people to stop buying cars (the run rate went from 17 million down to less than 11 million in one year). I'm pretty sure that even the best economists and forecasters did not foresee either of these.
As for the products, I drive an '08 Chevy Silverado and it's an incredibly good product. I know someone mentioned they are driving a Toyota Yaris. Why did you buy that? Probably because gas was somewhere between $3.50 and $5.00 a gallon at the time. What did you drive before that? Probably something bigger. We Americans feel we should be able to choose what we drive and when gas is not expensive, we prefer to drive larger less fuel efficient vehicles. If you watch vehicle sales as they are reported at the end of this month, you will probably find that America has already shifted back to larger vehicles. The domestic industry should not be scoffed at for building "gas guzzlers". Toyota was smart enough to open a brand new plant in Texas to build "gas guzzlers" just as the gas prices started escalating, so clearly none of the automakers saw the gas crunch coming.
Another little known fact, Toyota is registering an incredible amount of new Tacoma pick ups over the past 18 months. Wonder why? It's because they are buying back the old models from customers at an amazing rate. The frames are so bad that I understand they check them by hitting the frame with a ball peen hammer and if it penetrates through the frame, they buy it back if the customer will buy a new one. I think that if you check you will find that Toyota recalled more vehicles than they sold in the US last year. Anyone hear of the engine sludge problems they had?
Chevrolet on the other hand is winning awards for quality and styling. The new Malibu was 4th among ALL vehicles in quality rated by JD Power. Ahead of it were a Mercedes, a Lexus and a Porsche, all costing more than double what a Malibu cost. Or what about the Chevy Volt that is coming in 2010 that I am hearing may get a fuel economy rating of 100 miles per gallon? Clearly I'm a Chevy man. I like that each vehicle that the domestic "Big 3" produce employs significantly more Americans than the Imports that are assembled here (because many more parts are imported, not because they are more efficient).
I know we are all sick of hearing about and paying for bail outs. AIG running off to party at resorts with taxpayer money should be cause for jail time in my opinion. But I think a $25 Billion loan to the domestic auto industry which (in my humble opinion) does have a pretty good chance of being paid back, is a better investment in America than most in a time when we all would benefit if the economy gets better.
Again, just my opinion.
It's peanuts compared the amount of jobs at risk.
I think jobs in America are the new (and old) bubble. If we have to subsidize automobile companies (or any company for that matter) to save jobs, then we really have no jobs, we have welfare.
It's like propping up real estate values to preserve "wealth". The resulting "wealth" is mythical.
Just my thoughts.
" If we have to subsidize automobile companies (or any company for that matter) to save jobs, then we really have no jobs, we have welfare."
I have to take issue with your characterization of the loan package. The auto companies are asking for a LOAN from the government because the open credit market is frozen. They simply cannot get capital at the current time in the open market. This is a result of the Wall Street geniuses making a mess of the credit market. This is not a subsidy, welfare or handout.
Most of us have asked for a loan to be in the business we are in. GM's plan indicates that they plan to repay the LOANS in full by the end of 2012. Has any of the financial institutions who have sucked up $350 billions dollars offered a date for repayment?
Our country has too much at risk not to support this industry with these loans. If the auto industry goes down, it is going to cost all of us a lot more than the cost of these loans. This is a bargain compare to what our economy will look like after wiping these companies off the map.
Bryan,
In their own words, they need $15B to make it through February. I have a strong feeling they'll need more quickly...just like the financial companies. They all just strive to get their foot in the door. Once the Government is invested, it's game on and the hand outs keep coming.
GM's plan indicates that they plan to repay the LOANS in full by the end of 2012.
Or else what? A rule without a consequence is nothing more than a good idea.
If the auto industry goes down, it is going to cost all of us a lot more than the cost of these loans.
I agree, but If we don't internalize free market principals, then we have much more to lose.
Its a fallacy is, IMHO, that if GM goes bankrupt all the jobs in GM and all their suppliers will just go poof. For one thing, the big three and their suppliers only account for a fraction of the auto jobs in the US. Every "foreign" marque has a bunch of jobs here in the US. Every one has dealers. Many, especially all the large ones, have plants here that employee lots of people.
The big three provide 20% of the US supply. If they were to disappear, that demand would be satisfied by someone. The existing manufacturers would expand their output. New manufacturers would appear. Some of that production would be outside the US, but some of it will be right here. Toyota, Nissan, Honda, etc., would ramp up their production here in the US. Think about it. There would be a bunch of shuttered plants and out of work, well-trained workers. Further, you have a bunch of out of work executives who know this business in and out. Rest assured some of these folks would start new companies. There's a whole new round of non-US manufacturers waiting in the wings just dying to break into the US market. These old and new companies would acquire the best of these shuttered plants and start hiring.
Would every job that was eliminated by the big three disappearing be replaced? No. Because there's not enough demand to justify that many jobs. But, as many jobs as would be needed would be created to satisfy the demand.
Who would really get hurt? GM shareholders? We'll they're already been pretty well trounced. Employees? Yes, the ones that don't get picked up by the non-big-three manufacturers would be hurt. A bunch of people are going to get hurt in any real restructuring because there are more jobs than can be supported by the demand. Pensioners? Yep, I would say this group stands to get hurt the most. To some extent, the feds or the union will end up picking up some of these obligations. But these folks are counting on these companies to continue to exist indefinitely and to have enough money to support their pension obligations. I suspect that in any real reorganization, they're going to take some pain, too.
So, I see any real reorganization of the big three as causing about as much pain as letting them go bankrupt. The down side to bailing them out is that they won't do any real reorganization. They will continue to limp along with an every shrinking market share, going back to public trough once a quarter for more money to support their organizations. They will continue to support as many people with their declining sales, requiring ever greater public funding. The same "too big to fail, too many jobs at risk" argument continues to hold. Take it to the limit, and they don't make any cars at all because they can't sell them. All their income comes from the government, and they continue to pay for all the jobs. That sounds like a huge welfare program.
Lending them money will not cause cars to start selling.
We will have to give them a check every month.
And filing bankruptcy does Not mean GM closes it's doors and becomes extinct.
Personally I think bankruptcy will end up fixing more of their problems in the long run than a loan.
I used to work for GM and then an automotive parts supplier..
The big 3 have aLOT of serious management issues and the union is another big problem for them to compete.
We shall Wait and watch this Saga.
and I feel the same as everything Jon posted above ^
Bryan wrote: The auto companies are asking for a LOAN from the government because the open credit market is frozen.
This is an important distinction; however, it's also true that the American auto industry needs to revamp itself and there's no better time than the present to do it.
On the other hand, the things the American auto companies are doing correctly seem to get short shrift.
Open Letter to Thomas Friedman
I haven't posted my $.02 yet in this post. We in the US buy a certain total amount of cars each year. Some of those are from our Big 3, some from foreighn manufacturers abroad and some are manufactured here by the foreighn auto companies.
Whatever the # of cars sold here in an average year will continue to be needed to be manufactured. Many of those could be manufacyured here by the Non big 3. That is ok with me. They'll emply people, pay taxes and provide what we need. Whos' to say that laid off employees from the big 3 won't be hired at those plants and the makers of bumpers, tires, fenders, etc will still be needed.
Anyone know what the union workers make on an assembly line? They wouldn't agree to any cut recently in pay. Why should we subsidize them? We are on line for a brand new plant here in S. Texas that is NOT from the big 3, thank goodness!!
Ford is the one that said they didn't need a bailout. I'd buy SOMETHING from them if I need a car right now.
BTW, I have a Dodge truck and Viper, a Pontiac Firehawk, and wife has a Kia sportage. 3 out of 4 is doing my part, imo.
I think they will get bailed out in Jan. They did their part. They delivered the votes. I think the pressure is on to make this'bailout" part of the previous Admin.'s doing for all the political reasons
Let them fail
You either make money and/or add vaule to the market or you do not.
The premise of if we go bust, it will make it bad for you, so please save, me is wrong.
Maybe if they made 35K cars that lasted they would not be in this position
One of the problems in the auto industry is what they've quietly branched out into. Let's look at GM, they branched out into GMAC. Now, GMAC makes money partly from car loans. However, GMAC is also a major mortgage lender.
To make this worse, GMAC ownes ResCap, the huge mortgage servicing company. And whose mortgages do they primarily service? Fannie Mae, the largest purchaser of mortgages, currently under conservatership by the government.
So, the dominos start to fall. GM goes bankrupt, their suppliers go bankrupt or simply close, local dealers may also close. Then, since GM is bankrupt, GMAC is bankrupt. This deals a blow to the housing market (but this is a topic for another post). ResCap then is unable to continue servicing the Fannie Mae loans, requiring further bail out by the government.
Either way we do it, they get bailed out directly or indirectly. Personally, I would like to see some major restructuring of the auto industry, which almost always comes from serious financial difficulties. No one is bailing me or my neighbors out, and we're not frequenting the malls as before, so the mall stores are failing. It's a vicious cycle.
If GM goes bankrupt, GMAC will get spun off as a separate entity and picked up by one of the big banks. There's ample evidence a massive consolidation is underway in the banking industry, and GMAC will just be another small piece of this consolidation.
ResCap also will be spun off, or its loans will be picked up by some other servicer.
Numerous other companies have experienced exactly the same fate. IndyMac and Countrywide just to name few. I don't know the relative size of IndyMac and GMAC/ResCap, but I'm sure Countrywide was much larger.
In both cases, I see no impact at all on the housing industry.
Again, a GM bankruptcy will NOT result in the demand for cars going down. That demand will need to be supplied by someone. Many of those same plants, workers, and suppliers WILL continue to supply that demand.
Whether GM goes bankrupt or not, the industry as a whole MUST adapt to the reduced demand. IIRC, GM has 8500 dealers while Toyota has 1500. There US market share is about the same. That tells me half or two thirds of the GM dealers must go away regardless of a bailout or a bankruptcy.
I believe what's really happened in the car industry is the same thing that happened in the housing. Easy money drive very high demand. For housing, where its harder to just pump out new houses (though builders certainly tried), prices rocketed. For cars, it IS easy to increase production. So prices stayed roughly flat and cars were pumped out. Money is now much tighter. So, demand falls. House prices fall. Unsold cars are piling up in Detroit and LA. Auto production must get in line with the new level of demand. Unfortunately, Detroit built their production around large, expensive cars. Combine high gas prices and much tighter money, and I would expect demand for those big, expensive cars to see more of a hit than smaller, cheaper cars.
I seem to recall they're attempting to become a holding bank to take advantage of government bailout (TARP) funds, but are having difficulty.
I'm not really sure there are any banks left that have the resources to buy up GMAC/ResCap, even at a discount.
This is easier said than done and an over simplification, but how about some sort of forced merger of the Big 3 into one streamlined entity? They could get rid of TONS of redundancy, and to the workers who will be fighting to keep the jobs that are left, welcome to the club! It's time that workers at these companies start actually working for a living like the rest of us.