Yeah I did....the problem is the government doesn't care what you and me think.

 

You might want to read in detail how the Great Depression happened.

It's not an issue of dominoes, it's an issue of a vicious circle that spirals downward till it hits bottom. Back then, the US was a major manufacturer, major oil exporter, and between it's exports and federal works projects provided a groundwork for recovery. We have neither advantage now.

 

Here's a huge part of the problem. Nobody should be financing 100% of anything. If you can't afford to put down a decent down payment, then you don't need to buy it. Someone making 50k a year should be able to manage their money well enough to save some money from every paycheck until they have enough for a sizable down payment.

 

People making $50K a year probably shouldn't have been receiving 100% (or larger) loans for $40K pickups all along. There has been a lot of marketplace distortion since late 2001 that has allowed a lot of people to ignore the fact that we as a country can't really afford to buy 17M cars each year at an average price of nearly $30K each when the national median income is only $48K. Those numbers fail to add up.

Totally agreed with points B & C; I'm yet to be convinced on point A until I see an actual plan with realistic numbers. But GM doesn't seem to be interested in agreeing to any terms and conditions similar to those above; it just wants the money. Note that Rick even stated that he wouldn't be willing to step down as a condition of receiving government loans.

I'd argue that Chrysler was in a much different position in the 80s. It had a liquidity problem (not enough cash to pay its immediate bills), but was still relatively solvent (or close to it). GM, on the other hand, not only has insufficient liquidity ($16B in cash and $10B in receivables compared to $70B in accounts payable), but is also insolvent (<$130B in assets vs. >$190B in debt). Not only does GM need some untold number of billions to keep the lights on through next year (that $25B might get burned by Dec. 2010), but it also needs to figure out how it's ever going to fully-fund the VEBA and start hacking away at its massive debt.

 

1. I’d like to think that the Feds aren’t just going to hand GM money but I’ve seen little to convince me that it’s going to any different than it has been so far…I guess time will tell.


2. Fbodfather himself asked me who I worked for (I’ll give him the benefit of the doubt as to why). So…if it’s fair for him to ask me; why is it out of line for me to ask the same thing of someone else? As I said to Darth, it might be a good idea for everybody to come forth with their motivations behind their opinions expressed in this and the related threads.


3. Moving on, I would submit that the Chrysler loan (minuscule in comparison) was in a very different time and in a very different situation; it could also be argued that ultimately it didn’t work all that well or Chrysler wouldn’t be teetering on the edge again. In any case, the question asked by onebadponcho is a legitimate one – how exactly is GM going to pay back this “loan”?

You can’t borrow your way out of debt, whether you are GM, the Federal government or Joe Sixpack…I would submit that if GM can afford to pay back the loan they likely wouldn’t need it in the first place. At the very least, they need a hell of a lot more revenue coming in than they do now just to meet their current debt service load/mandatory obligations, much less an additional debt load of $50B (or whatever the number ends up being) to deal with…where is that money supposed to come from?

Giving or loaning them money doesn’t automatically generate product being sold….I don’t see it unless GM has some magic dust to solve their problems as soon as they get the money!


4. As to the UAW, if the UAW is no longer an issue then why is GM’s transaction price so poor compared to almost every other nameplate? It’s not something I check every day but the last time I did, Honda, Nissan, Toyota, Subaru and others were all cleaning GM’s clock on transaction prices on models built in U.S. factories by U.S. workers…so I think it reasonable to ask, if GM can’t build them in the U.S. as cheaply as the transplants and the UAW is no longer the reason, what is the reason?

Maybe the UAW isn’t a factor any longer but I’ll believe it when I see the numbers.

One more question, if the UAW isn’t part of the problem any longer, why is part of this bailout an inclusion of $25B to the UAW???

 

Amen and thank God that at least you and a few others understand that!!!

 

This is the type of things that will win more support (and respect) from people, not the old tired " blame imports and tariffs" game. The old game of "We only built what people wanted" doesn't wash any more in the public either. People are very aware as a group that there was huge profit margins in trucks compared to cars, and it's no jump to imagine why cars languished and import brands filled the void.

The next step is for GM to tell exactly what they intend to do differently and have the government go over everything (as you say) with a fine tooth comb. Eric expands my suspicions that something fishy is going on with regards to GM and their finances: When did GM realize that it was in dire financial shape?

Even before credit dried up... even before the housing market imploded, it seems that GM's finances seemed prone to accounting "errors" and unexpected debts and losses against predictions otherwise. Ford used to do this, and finally gave it up a couple of years ago.

None the less, blaming something other than Tariffs and Imports is the 1st step towards recovery. You were sounding a lot like the so-called "Old Guard" General Motors that was supposed to be gone years ago.

 

GM's problem is also cash...cash to be able to provide loans for people to buy their product....products that are pretty damned good....and with the lower gas prices and available loans, these products could be moved.

Anyone who believes that some government idiot could somehow magically fix the automotive industry needs to put down the koolaid.

 

Maybe this situation is what needed to happen for GM to FINALLY change there way of thinking and doing business, a kick-in-the-a$$ to FINALLY adapt to today's (and tomorrows) needs, and transform itself into a lean and mean corporation that can efficiently operate and make a profit. I don't see this happenning unless there is government intervention, but unless there is some kind of stipulation that GM change there ways, I can see them just burning through this new wad of cash, hoping the economy improves before they are broke. I don't profess to know what it would take to make them a more efficient company, but it's obvious to me the people currently in charge aren't the ones to fix this.

 

Agreed.


IMO, both of you asked when it wasn't related to the subject.

Disagree with the Chrysler part. The loan was given to Chrysler in '79. Chrysler prospered in the 80s. Chrysler had so much money in the 90s, at one time it had more money than General Motors. Bob Eaton fell for a merger with the smaller DailerBenz at the exact point when Chrysler had it's most money (far and away more than Daimer). Whet happened then? Daimler funded Smart, and expansion and revamping of the entire Mercedes Benz lineup, and gave bonuses to every Daimler worker outside of North America. Chrysler got decimated.

To this very day, if anyone can explain to me how a company like Chrysler that had almost enough money to actually BUY MercedesBenz was in such bad enough shape within a couple of years that large numbers of factories had to be closed & new products canceled, I'd appreciate it.

Gotta disagree again. With that logic, no one should have loans... since if they could pay it back, they'd never need one.

Reasons:
a) GM has been in business in the US for 100 years.
b) The average lifespan is something like 77 years.
c) The auto industry was once a labor intensive industry compared to today.
d) Honda, Toyota, Nissan, etc... have been building vehicles in the US for only 20 years or so.

Conclusion:
GM has made cars here in the US for 80 years longer than Imports have been here. Combine that with the fact that people live a long time and that the industry was labor intensive till the 1980s means that GM has a massive number of people on their pension next to the relatively new imports.

Also, the imports set up shop just as lines became automated, so it's doubtful they will ever be in the position of paying for a massive number of employees as GM (and Ford and Chrysler) has. That's not the Union. That's a combination of a aging population and a decreasing market share.

When this model of benefits was in effect, GM owned 50% or more of the US automotive market, and plausibly could have continued to afford such retirement benefits. However, with a reduction of market share combined with fewer workers (something like 10-20% of it's heyday), not only is the union merely a shadow of what it once was, you have each new vehicle responsible for paying a far greater amount towards pension than back in the day when GM was selling twice or 3 times as many vehicles. This has forced more workers off the lines, and fewer UAW members needed to make a car or truck.

That's pretty much covers it.

All you need to do is look at UAW membership over the years, and look at the summary of their last couple of agreements.

It's one thing to say "I'll believe it when I see it". It's a little more work to actually check yourself when the numbers and information are available.

You have wrong information.

First, congress gave a grant (you could liberally call it a bailout) to the US auto industry to be used to assist in creating fuel efficient cars. This was in response to the astronomical fuel prices we had this summer and early fall. US automakers could use this money to convert plants, put towards new car development, or the development of alternative powerplants. The stipulation was that the company be a US based automaker and that the company was financially viable.

The money you've been hearing about lately is an evolution of giveaway money GM all but attempted to blackmail from the feds to fund a takeover of Chrysler. Since then, stocks have crashed & $700 billion was approved to stave off a economic crash and the idea of GM buying Chrysler has crashed. Now, the truth seems to be that GM actually needed the cash itself to keep from becoming history by middle of next year, or next spring, or this winter, or the end of this year (the story keeps changing).

The feds are considering a backed loan only if they are convinced that GM will be around long enough to pay it back because they are rightfully terrified what will happen if GM crashes. Problem is if they make money available to GM, they also have to make it available to Ford and Chrysler as well.

So, now, the idea is to loan the money from that 700 billion that was supposed to go to Wall Street (which at $25-50 billion, is a small amount).

Hope that explains it.

 

Look man, I'm frustrated about the situation of our country right now. That's what happens when I've spent over 16 years of my life defending it. Even with that said, with you doing 7 people's jobs and literally wondering if you'll still be in this industry tomorrow, I can't even begin to comprehend your frustration.

This is where I'd like to be wrong. So.....if there's a plan, what is it? I'm not looking for the whole playbook, but if I'm going to agree to giving a business loan, that person/business better have a d@mn solid plan. Like I said before, if I went to get a loan under GM's financial circumstances, I'd be VERY LUCKY to be asked for a plan before being told to go straight to hell. Plus, if I was asked for a plan and said "Well we have one, but it's a secret so we can't tell you.", I'd get laughed out of the building so fast my head would spin, without so much as a parking validation. The reason us "regular" people are asking stuff like this is because, frankly, our government that used to be more trustworthy no longer is; hence the micromanagement.

At least Ford seems to have presented a plan (AND operating under the assumption that they WOULD NOT get the "loan"), unlike GM's plan which seems to be, "Just hold on until we're bailed out (or loaned the money), then we have all these great and wonderful things we'll do starting in 2010." Again, it's only a loan when the money is paid back. If you take money from me and don't pay it back, IT'S NOT A LOAN, IT'S A DONATION, and I'm not ***king UNICEF. WHERE IS THE PLAN?

Just because those officials were elected doesn't mean I elected them, or that I trust them. That trust has to be EARNED through merit, and frankly, our government is doing a really crappy job right now.

Well, I think most of us know that the "loan package" will pass. I sure hope things work as well as they did for Chrysler.

That's ironic, considering about 80% of the public's answer to the "$700 billion bailout" was HELL ***KING NO!!!!!

QFT.

 

Guy, I've seen you write this a few times in recent weeks, but I don't think it's quite true.

GM still owes billions of dollars to the UAW for the union to assume medical benefits to retirees.

I'd like to see a reference for this. Everything I've read indicates that even if you ignore the large one-time payment to the union to take over health care for retirees, the UAW wages and benefits are still somewhat better than the non-union wages and benefits at the transplants. Plus, there are still union work rules to deal with, even though they're nothing like they were.

I have never seen an article saying that there is no cost difference, as you claim above, so I'd really like to know your reference.

 

 

I appreciate that you are consistent in thinking both of us were wrong…but where were you when Scott asked the question of me?


Tell you what – I’ll agree that providing a loan to Chrysler “worked” at the time if you’ll agree that the situation between where Chrysler was then and where GM is today is extremely different and can’t really be compared one to the other!


Now you are getting it! Actually, debt entails huge risk…and financing a depreciating asset is not only a huge risk; it’s just plain dumb…“like a rock” is right because that’s what happens to the value of a new vehicle…it drops like a rock.


All true to an extent.

Nissan has been here more than 25 years and Honda was here before Nissan so your timing is a bit off.

Another point…the technology that allows Nissan or Toyota or Honda to build vehicles more efficiently (less man hours per vehicle; etc.) has been available to everyone, GM included…it’s no one’s fault but GM’s if they didn’t avail themselves of more modern manufacturing methods.

As to the number of retirees – true. However, while that may well explain a significant part of GM’s higher cost per vehicle than a Toyota or Honda, it doesn’t make me feel warm and fuzzy to know that a good sized piece of the money I might spend on a Camaro or Corvette is going to support a retired worker.

As I said earlier in this (or perhaps another) thread, pension obligations that can no longer be afforded may need to be eliminated or at least severely lowered to a sustainable level. I don’t want to see a retiree loose benefits but to some extent, every retiree’s future is tied to the continued success of the company he/she retired from and if that company is near total failure, drastic measures are in order.


I’m sure that compared to prior contracts, current UAW contracts are “stingy” by comparison but you are the first I’ve heard say that they are now relatively equivalent with U.S. workers in transplant facilities. I’m not saying it isn’t true but I’d love to see more than a summary of the current UAW contract with GM.

As I understand it, GM has agreed to build specific product in specific plants…that doesn’t sound like a sound business move to me; especially in today’s environment.

When Honda or Nissan needs to reduce capacity they can cut a production day here or there and workers either take “vacation” to cover the work hours lost or they get paid for the hours they actually work…is it that way at GM or do those workers get paid for forty hours whether they work forty hours or only 32?

Most companies are scaling back Health Care coverage and/or shifting more of the burden to the employees…is the UAW/GM doing the same or preserving the status quo?

I’m not trying to be accusatory here…I’m really just asking.

I’m also trying to point out that what a lot of current (and especially former) UAW workers may take for granted likely seem like streets paved with gold to most of the labor force in this country. I’ve no problem with workers getting those wages and benefits when the companies they work for are making the income to support it…I have a big problem with it when the companies they work for have failed and they are now insisting that they have to have Federal intervention because they are “too big to be allowed to fail”.

Good discussion...thanks for now just calling me GM hater and dismissing my observations.

 

I would absolutely love to see an answer to this. Not holding my breath though . . .