Crushing hand of the government?

Once again, there would be no GM here today if it wasn't for the "government". No Camaro, a heap of unemployed friends that we have here on this website, and given the size of General Motors and their shadow, the decimation of not just a sizable chunk of the last North American based automotive supplier network, but the collaspe of the state of Michigan and an acute crisis of a sizable number of US states and the wiping out of Pension Guarantee Corporation.

Again, I must remind you that it wasn't the "crushing hand of government" that got GM into this mess. It was years of bad (and at times, **** poor) management and shortsighteness of the General Motors corperation and it's resources. I should also remind you that GM's 1st quarter profit dropped 90% from '06 to '07, it's stock dropped 90% between fall 07 and fall '08 (before the recession kicked in), and the biggest most staggering fact that GM lost $15 BILLION the 2nd quarter last year (that's just 3 frigging months!!!) it's 3rd worst loss in a history that included (adjusting for inflation) a depression, a world war, and countless recessions, including the 70s.

Again... all this well before the bottom dropped out of the car market.

GM went to Ford last summer as an attempt to create a merger.

After checking into it, Ford ran away like a scalded cat.

Once again (I keep saying this because I feel I need to)... all before the recession went critical.

Although the "crushing hand of government" hat least has a very good grasp as to what GM needs to do, and is actually making it do it, Goofy, The Three Stooges, and even Peter Griffin might get lucky and seem to have a better chance in getting GM running the way it should.


Is government's hand crushing GM?

Nope.

GM was crushed well before the government stepped in and kept GM's years of "management" from taking down the US economy with it.

 

Guy,

Please stop injecting facts into the argument. They get in the way of political grandstanding and statement-making.

Thanks.

 

Id say that says alot.

 

There is always a price to pay for government assistance, believe in that. They don't do anything out of the kindness of thier hearts. We can hope that the payback won't be too servere, but I doubt it. This still doesn't change the idea about what this thread is about. I hope the best for GM but we will see.

 

Your right, I see no problem with the government taking over one of the largest companies in the world, firing the CEO, installing it's own board members, putting the well being of the company under a "car Tsar" who is 30 years old and has no experience in the automotive industry, after putting the well being of the company and it's recovery plan ( that was forced upon GM) under an auto "task force" that have zero automotive experience, the hiring a new CEO that has no automotive experience and pronounces "I know nothing about cars". The unionized labor force gives up nothing in the way of wage reductions or benefits but does gain further control of the company, not to mention the great track record of the government being very efficient and business savvy and the ability to keep politics out of decision making. I'm sure they will have zero input as to what vehicles will be made and what they can do with thier assets and labor force. Oh yeah, GM can't take advantage of overseas operations and import vehicles they make in China too (that upsets unions). Now take all that and look at what has been done with other companies who are controlled by the government and see how the rules change at a whim to whatever the president or Congress sees fit.

Sounds good aye comrade? Your right, all fears are unsubstantiated and put to rest.

 

GM was loaned all kind of money during the 00's, they could pay them back, so now they are in bankruptcy. The "payback" is 60% ownership of the new GM that will probably never be worth more than $30B-$40B (in today's dollars). That doesn't seem too sever at all. Severe to me would be CH. 7 (something Jim Cramer wanted) and having GM's parts sold off the the Chinese, unemployment goes up another few percent, and the USA falls into another great depression. Which then benefits the people like Jim Cramer who will short sale every company in America and make a boat load of cash off everyone else's misery.

 

How many on GM's BOD over the years has had a lifelong background in the car business? Union has one BOD and the govt has 1 BOD. The sky is falling!

 

The government and us the tax payer are finally paying the piper. After decades of operating in automotive trade deficits. Now around $150 billion annually with Japan alone, there's only so much finanical punishment can be sustained until the financial are no longer sustainable and domestics centered manufacturers give up the ghost.

We're paying the price now for our government not negotiating balanced and reciprocal trade between the Japan and the US. The US tax payer shelling out tax dollars that our kids and grand kids will get to repay because we refused to consider products from companies that we depend on for our very own jobs and way of life. If you don't support your own it's only a matter of time, as the wealth leaves the country, it will leave the nation poorer and less capable of sustaining the way of life as we've come to expect.

Everyone gets the blame, there are no innocent people in this situation.

 

Few last points I want to post on this subject.

First, there are always going to be people who will try to inject their fixed opinion into this. They will use this as a platform for their anti-union rants, or anti-government rants, or some rant about how bankruptcy laws are being broken. Take all this with a grain of salt, and always keep focused on the facts, and don't hesitate to post them (I certainly don't have the time to like I used to).


Government is usually the partner of the last choice. Not because the government is an evil, Darth Vader-type of entity, but because the Federal government is run by over 500 different elected officials, each one looking to win brownie points with each one of us who live in their districts... even when it's against the common good. Each one wanting to do something, anything to convince you to return them to the same job in 4 or 6 years.

However, the government also has the ability to to great good simply because of it's size. If the plane you're riding on doesn't crash into another in mid flight, or a criminal is taken off the streets, or your son or daughter grows up without small pox or some other disease that used to kill off 1/8 of youngsters before age 18, or when you get a drink of water, at home, that's the government.

The government has saved Chrysler and General Motors from their demise. And the government did this because the alternative (though some here simply can not concieve it) was many, many times worse than investing the money and muscle to try and save both companies.

Regardless as to what one personally feels about government themself, that's one thing that not a single person can credibly debate. Neither can one debate that GM and Chrysler arrived at this point on their own accord, before the recession actually kicked in for reasons unique to each.


Then there's the Union.

The UAW and CAW have done alot over the years to earn the cynicism directed towards it. But each successive leader, like the 500 plus Federal politicians (and literally countless number at the state, county, and city or township levels) have to enguage in one-upsmanship in order to get elected. This created a mess as to all things that go too far. But there was also a price. Union membership by the start of this decade was a fraction of what it used to be, and dropped even more drastically this decade as car makers got even more efficient in making vehicles. Something that once took perhaps 50 people to make can now be made with a few.

But also, the UAW has been a strong partner in making better cars in recent years, and they have also gotten to the point the past 8 years or so where they realized that the handwriting was on the wall, and they needed to change...or else.

There is no shortage of people here who run with the herd and apply a blanket condemnation to the UAW and all unions in general under the banner that everything is the Union's falt. However, unless you have a foreign car that was made in the United States or an "American" vehicle that was made in Mexico, you have a car that was made by a union.... and in most all cases, a union that is far more radical than the UAW.

Every country in Europe has a extremely strong auto union. Korea has a radical automotive union by our standards. Even Japan on their home turf has a autoworkers union. Doesn't matter if you drive a Porsche, a Chrysler, a Infiniti, or a Kia. It's union. And in most every case, it makes the UAw look like a bunch of corperate "yes men".


Much continues to be made about the UAW's so-called "ownership" of Chrysler and the government's so-called "ownership" of GM.

Fact of the matter is that the UAW's pension fund was converted into Chrysler ownership in exchange for concessions the UAW would have killed themselves first if proposed only 6-8 months ago. If Chrysler collaspes, that wipes out the entire UAW pension and the almost litterally hundreds of thousands who either do or will depend on it. If there is a better incentive for each member to make better cars, I can't think of it. I also doubt anyone here would jump at the chance to be in their shoes right now, having your entire future in jepordy like that.

As for government involvement with GM, one question: Who the h*ll else had the type of money to float to GM so they could restructure??!!

Banks & lending institutions stopped loaning money to GM a long time ago. Rick Wagoner was the perfect man to lead GM at the time because he came from the financial side of the house, and he was actually very good at finding ways to keep GM going when it should have crashed and burned years ago. That's why the board never got rid of him... he was actually keeping GM financially solvent when it shouldn't have been.... till the house of cards fell in.


There's always going to be people who will try to simplify things, and resort to the same old tired cliches involving unions and government. You're never going to change the minds of most since it involves years of conditioned behavior. Sure, the UAW in the past has earned some scorn, and the government isn't always the answer to everything.

But in the instance of saving GM and Chrysler, it was only the government and unions who could have done it. If it was up to debtholders, they would have cashed in and sold off pieces of the company, it's buildings, and it's assets since like a junked car, both companies were worth more parted out than they were worth as a whole.

Yes, it's a gamble with taxpayer money. But it beats what the "sure thing" was, and that also involved taxpayer money...... a LOT more of it.

I am personally glad to see people we know on this site that work for both GM and Chrysler still on the job, either shaping vehicles in the future that will be world class or will be selling them.

But it also very likely saved alot more than that.

Now it's up to both GM and Chrysler to recover, and as Lee Iacocca (who as CEO went to and got government loans to save Chrysler back in 1980) stated in a recent interview:

"Get the government out of your business as soon as possible...... government intervention is strong motivation to repay the loan early.

They're on you day and night. Their oversight is just too extreme. That's why our 10-year loan, we paid it back in three years. We couldn't stand the government. The bureaucracy kills you."

Not only is the government very eager to get their money back, the UAW is also more than a little eager to buy their pension back and put it into something far more stable than the cyclinical earnings nature of the automobile business.

 

I guess your use of the word "comrade" must mean that I'm a communist and is meant to put me on the defensive. I won't take that bait.

I'll just point out the glaring flaw in your reasoning that makes the rest of your argument moot. You contend that the government essentially "took over" GM, forcibly or otherwise. You fail to recognize that GM would have ceased operation as a going concern in 2008, during a period of time where debtor in possession funding would have been impossible to secure due to the financial crisis being experienced at the time (which is ongoing). Had GM sought a Chapter 11 reorganization, they would have quickly found themselves undergoing a creditor-forced chapter 7 liquidation. When GM asked for external intervention, government or otherwise, they knew what they were getting into, and they knew it would mean radical changes to the company. Not just the government, but any creditor supplying DIP financing would demand substantial representation to assure some return on investment.

If you believe that chapter 7 liquidation, with most assets going to foreign companies, most likely Chinese companies, would have been preferable to the current state of affairs, then we have a profound difference of opinion as to what would be preferable for our country.

 

Where is Jon Stewart when you need him!

 

Great post Guy. IT sums up so well what I've been trying to explain some people in the Facebook GM blog.

Do you mind if I post your comment on there. I will of course give you credit for it.

 

Basically Jim Cramer is pissed Obama stopped another Panic of 1907 and thus he won't have the opportunity to short every company in sight and then buy them back at 10¢ on the dollar. He would love to see the Dow crash to 1500-3000 because it would represent the buying opportunity of a life time. Great fortunes were made post 1907 and 1929 by those that bought after the crash. Remember the saying "bulls make money, bears make money, and pigs get slaughtered". Well the bigger the bear the more money that the sophisticated investor can make.