And the protectionists laws that the Big Three and the UAW have lobbied Congress for and received have done exactly the opposite of what was intended.

Tariffs do not work. Artificial barriers to free trade do not work.

Level playing fields are wonderful in theory and sound so "fair", but until we have a one-world government, they aren't likely to exist.

 

Scott, any idea if GM is going to pull back the covers on the turn around plan a little? Obviously they're not going to say everything, but it'd sure go a long way if the general public could see that GM has a plan and is not just using the money to prop themselves up for the next year or two.

 

even if a huge loan WAS given to GM what good will it do? it takes longer to get a vehicle approved then to actually design/build it, the corporate structure will still be a mess and anything but streamlined. simply a stopgap measure delaying the inevitable. if conditions were attached to the loan such that GM had to un-screw itself i'd be all for it but as for throwing money at a sinking ship with multiple hull ruptures just doesn't make sense.

 

Great posts Scott and Jason. They pretty much support everything a lot of us have been saying all along; that is if any one of the Big 3 fail, it would have global impacts that effect everyone. The best thing to happen is for the government to give guaranteed loans to Detroit, which will be paid back with interest. (And probably a better ROR than what taxpayers are getting from social security.)

However, as bad (and uninformed) as some of the comments have been on this website, they absolutely pale in comparison with some of the nonsense day traders are posting on public finance forums about GM. I can't believe there are actually sane people out there that think GM filing bankruptcy would be a good thing, and that the only thing GM can do to save themselves is to bring the Volt out now, because everybody wants one.

 

Scott and Jason,

Thanks and well said, I too work for GM and don't bother to post much on this site. I get a kick out of people who know more about GM, Ford and the UAW than I do. And I live it every day. I work at a "closed" plant and know less about my future and income than a few of the posters to this board.

Got to Run

Roger, trying to be positive.

 

I agree that the Big 3 shouldn't be allowed to collapse.

I also agree that the Japanese have an unfair advantage when it comes to gov't support and such...

At the same time, I've also heard of British Leyland and their story is remarkably similar to GM's... product overlap, brands that basically compete against each other, aging vehicle platforms, reputation for poor quality....

On the other hand, GM has been making great strides at fixing all of these issues...

If you're going to bail out a bunch of questionable banks, you can't not bail out a few companies that just happen to be the bulk your manufacturing capacity.

 

Scott, I'm dying to ask something that has been discussed here and may not be received well by a GM corporate employee so please don't take this the wrong way....

Let us assume the playing field is somehow leveled, let us assume that GM gets government loans and continues on....

Is something being done to address the product approval system that is currently in place? What lasting change will there be if nothing is done to fix that system?

If it is only half as bad today as what was outlined in "All Corvettes are red", then it is still a disastrous, nightmarish train wreck.

 

A few questions I have for Scott or anyone who wants to answer them:

1) How long will it take to pay back a loan of, say, $25B (including interest)? We've already seen AIG re-negotiate its terms because repayment would have been impossible. With $36B owed to the VEBA and a cash burn of $2B/month, it seems like loan repayment would be difficult at best, considering the shear amount of money required to keep GM afloat and the fact that GM has destroyed about $70B in wealth over the past four years.

2) What measures will be taken to fix GM's cost structure? If the product is good (and it is), but money isn't being made - then there's some serious back-office work to be done. How does GM intend to develop an army of Lutz-like individuals who are prepared to find and destroy incompetence everywhere it can be found?

3) If US jobs are being used as reasons that a bailout is required, is GM prepared to make a commitment to US suppliers that build parts in the US using domestically-sourced components and materials? This would reverse the prevailing trend of GM telling its suppliers to move to low-cost countries "or else", even when it makes no business sense to source product from a half-world away. I'd like to see someone estimate the number of US jobs that have been destroyed due to the overseas sourcing of components by the Big 3. Extra credit will be awarded for public hangings of GM's purchasing managers.

4) When can we expect clarity in GM's accounting? Part of this problem comes from the fact that GM mis-stated its earnings from 2000-2004, due to improper crediting of supplier "givebacks" (which in any other industry would be referred to as "extortion"). Combine this with the fact that GM racked up $38B in deferred earnings (the cause of the huge write-down in late '05) and statements in the past several months that there was no risk of bankruptcy, and it's safe to say that investors have not been given a clear picture of GM's finances in the past decade.

5) Is GM's board willing to take an active role in corporate governance, including holding GM's executives accountable for the recent past performance of the company?

6) How does GM propose to address the issue of massive overcapacity here in the US by the collective Big 3? We know that the preferred fix was to buy Chrysler, grab the good parts, and throw away the rest (something that would have destroyed tens of thousands of US jobs), which would have certainly taken a lot of capacity off-line. What fix does the Big 2.8 now have in mind for this problem?

Until GM is willing to provide honest answers to these questions, I say that no help should be offered. The picture has been grim ever since the corrected financials were released in 2005, and yet Rick wasn't willing to 'fess-up to the problems until last Friday when the writing was written on the wall in red ink. That's not good corporate stewardship.

EDIT: Let's add a bonus question - how much money in the form of tax credits has GM received as part of the US government's R&D tax credit program? I ask this because there are always a lot of claims about how much money that foreign automakers get from their governments, and yet very little acknowledgment of our tax code's extremely generous allowances for "research and development" activities. Given that the code allows a direct credit of up to 20% of qualified activities and that GM spends roughly $8B on R&D, doesn't this mean that GM already collects over $1.5B a year in federal aid?

Note that the snarky tone of this post should not be construed as a desire to see GM fail. However, sh*t has to change before the company deserves any taxpayer money, and that includes some fresh emphasis on keeping auto jobs in the US instead of building cars in Mexico or Canada using Chinese and Indian parts.

 

I agree with f-bod 10,000%

im not sure why americans will cheer the downfall of one of the biggest american companies, and cheer job loss of other americans.

its sick - Do you just want to lay down and let europe and japan own this country? I'd suggest you rednecks brush up on your language skills.

 

I’m not sure why thinking that a failing company should actually be allowed to fail or that thinking that the Federal government has no business giving money to private industry is equivalent to “cheering” for GM’s downfall.

While this “redneck” goes and brushes up on his German and Japanese language skills, there are a couple of skills you might want to brush-up on yourself.

 

Thanks, and Great Post. I've been telling people the bailout will be necessary just from a Political stand point and gov't cost (all those out of work people would be a political nightmare). But then I've been reading more and more and it looks like Ch. 11 of the big 3 really could be the straw (at least one of them) that breaks Americas back. The rapid unemployment would just about instantly send the US into a great depression.

Scott, the elephant in the room, at least in my mind is PEAK OIL. IEA just released a report saying global production could fall by as much as 9% in 2009. And with the credit crunch there isn't a lot of capital going around to invest in new, more expensive production. I don't see GM's situation changing much by just getting a bail out or loan. GM is going to need to drastically change its line up and be prepared for a smaller US market. Just adding direct injection and 6 speed autos isn't going to cut it. I think they are going to have to go 50%+ plugin hybrid in as soon as 5 years. What are people in GM doing to prepare for this looming energy/oil crisis that can't come at a worse time?

see page 8 = http://www.iea.org/weo/key_graphs_08...Key_Graphs.pdf

http://www.bloomberg.com/apps/news?p...I&refer=energy


I agree that all markets should be open, but a level playing field can be achieved (or very close to it) by matching tariffs.

 

 

Scott, Eric makes some very good points:

Let me add that I agree with about 80% of what you have said. I agree that simply letting GM fail is NOT an option, and that only those who are so idealogically blind they'd rather wreck the United States of America than recognize they're wrong are the only ones who are saying "Let GM fail".

However, that 20% I disagree with you, and I think it deserves being reconsidered.

It's true that Germany has high tarrifs against American made cars, HOWEVER you neatly skipped over the fact that General Motors (via Opel) operates out of Germany, and is not subject to tarriffs, and the money from Opel (which is doing far better than GM north America) goes into General Motors here in the US... and their cash burn furnace.

You mention also Japan and it's tariffs. However, Korea and China also have tariffs as well. However, again, you also fail to mention that General Motors has local operations in both China and Korea (in Korea via both Daewoo and Holden), and like Opel in Germany, both are highly successful and are helping fund GM's cash furnace. If I remember correctly, GM still owns Isuzu which is Japanese. I feel that if GM was serious about penetrating the Japanese market, Isuzu would have been the beachhead int Japan the way GM's Buick was successful in setting a foothold in the far more restrictive... and I mean way more restrictive than Japan regarding tariffs... China market. If GM wanted to get Japan, it would have gotten Japan.

From here, it almost appears that you are trying to fog the issue by using examples that have little bearing here. The issue is not GM of Germany not succeeding or GM not succeeding in Asia or China. The issue is that GM North America has wound up in a situation where it is not only sinking fast, it is taking the rest of the General Motors empire with it... even though those divisions are both healthy and since they are made locally, pay none of the tarriffs you mention.

The issue is General Motors North America.

General Motors North America put far too much resources into trucks. It was foolish because everyone has experienced fuel crisis and economic downturns in the past. Each time, GM (as well as other makers) had a broadbased array of vehicles, so they had bases covered. In the 1990s, GM even gained and closed the gap in many instances with imports regarding percieved quality. Yet, because of the diversion of a lion's share of cahs to highly profitable large trucks and SUVs, GM left a vacuum in improving car models that import brands stepped in and filled. Sure, GM has made great strides in improvements, but by then, it's a matter of catching a speeding target. The gaps closing, but the gap remains.

I'm in lockstep with you on the importance of GM surviving. If GM went down, it would wreck the US economy not to mention what it would do to our automobile industry. To be blunt, anyone who doesn't realize this and demands that GM be allowed to go under is a complete jackass.

But at the same time, blaming someone else for the faults that GM has made does not help since it's very clear that there is something terribly wrong with General Motors. As I've pointed out before, GM should be in extremely good shape. It isn't. And it's begining to look like there's alot of financial issues that haven't surfaced.

You mention Chrysler. Yes, people were falling all over Chrysler a few years ago. However, Chrysler also made some terrible moves. The quality they had on the LX cars didn't carry over to anything else they made. Proportionally, Chrysler still apparently has more money than GM.

There is alot of support for GM here, including me. I've never owned a car that had an import based logo on it. I pull for GM, Ford, and Chrysler. However, we also have to be honest about our companies when they make mistakes. GM by all indications is the worse of the batch. No one is predicting Chrysler won't be here this time next year. Ditto Ford. Yet, today, on CNN, there's predictions that GM won't last to January. Canceling a chance to have a normal LA Auto Show doesn't help.

Again, I agree with you and there's plenty of us on your side. But please, lets not blame things unless we're going to lay out the whole story.

The public hears the same "Imports and Tariffs" blame game they heard in the 70s, 80s, & 90s, this time around, they're likely to turn against the US auto industry. And then you're going to hear them supporting GM's demise instead of seeing that GM finally knows and acknowledges what went wrong and if given the public's support for loans, GM will successfully fix it.

 

This has had me spinning for quite a few days now. I clearly admit that I don't comprehend all the forces at play. I don't want to see any of the big three bow out.

But, as stated before, what are the big three's plans? What is going to make this bailout a real soultion and not just a temporarely life line? This is money that America is going to have to bring to table. I think we, the American public, deserve a REAL plan from the big three before we give any of them one penny.

 

This is a sobering thread.....