American Automakers Near Bankruptcy News and Discussion

Discussion in 'OT Driven' started by TriShield, Nov 6, 2008.

  1. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,748
    Likes Received:
    1,611
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
    [​IMG]
    U.S. Democratic presidential candidate Senator Barack Obama (D-IL) (C) shakes hands with a worker at a General Motors plant in Janesville, Wisconsin.

    Wed Nov 5, 2008 6:20pm EST
    By John Crawley

    WASHINGTON, Nov 5 (Reuters) - President-elect Barack Obama courted distressed U.S. automakers during his campaign and pledged to help them, but the industry's health is so bad it may not be able to wait for him to take office.

    "He's not here until January (20th) and that's a long time in the life of these companies at the moment," John Engler, a former Michigan governor and president and chief executive of the National Association of Manufacturers, said on Wednesday.

    Engler expects fundamental changes in industry before Obama's inauguration. Engler was not specific. General Motors Corp said on Wednesday it plans to reveal new cost cuts when it reports quarterly earnings on Friday. Results at GM and Ford Motor Co are expected to be dismal.

    Both GM and Ford congratulated Obama on his election and associated overall U.S. economic weakness with Detroit's worsening financial prospects.

    Automakers hold out hope the Bush administration, reluctant to bail out Detroit, will act before yielding power to Obama. Carmakers, their allies in Congress and other industries have called on the Treasury Department to extend loans or other capital as a stop gap.

    In coming weeks, companies and their lobbyists plan to "dial up" their urgency. Industry plans to underscore its belief that its immediate problems are not of its own making -- that the dire predicament is closely linked to the global credit crunch and survival depends on federal intervention.

    While GM and Ford struggle, prospects at Chrysler LLC are the most uncertain. People involved in discussions about its future say the smallest of the U.S. manufacturers could merge, be spun off or be pushed into bankruptcy if not helped soon.

    Engler said a Chrysler failure could cost up to 1 million jobs throughout the economy.

    "It's not just the three auto companies, it's suppliers, all the way down the chain," Engler said.

    While Obama is not yet in office, industry sources say he could still pressure the Bush administration and exert leverage on the Democratic-led Congress, if he believes action is needed to avert a broad economic crisis in manufacturing.

    House of Representatives Speaker Nancy Pelosi called on Wednesday for a $61 billion stimulus plan to spur the U.S. economy, but said passage later this month would depend on Senate Republicans and the mood of the White House.

    Pelosi met on Monday with auto industry allies in Congress and key committee chairmen. There is no consensus yet on an aid proposal for Detroit.

    Carmakers, their lobbyists and congressional officials have suggested up to $25 billion in direct loans with few or no strings attached to help them through the current crisis, officials said.

    Government red tape is holding up another $25 billion in advanced technology loans for automakers that was approved in September. During the campaign, Obama called on the Bush administration to accelerate that financing.

    The United Auto Workers (UAW) has suggested billions in congressionally approved aid could go to covering retiree health care costs, freeing up money that companies would otherwise have to contribute for benefits.

    [​IMG]

    Obama Win Emboldens Auto Bailout Backers

    [​IMG]
    Democratic presidential candidate Sen. Barack Obama, D-Ill., shakes hands with workers at the GM Flint Engine South plant in Flint, Mich. With thousands of auto workers in Rust Belt states, Democrat Barack Obama promises government aid key to rebuilding U.S. automakers.

    By Alex Ortolani

    Nov. 5 (Bloomberg) -- General Motors Corp., Ford Motor Co. and U.S. auto-parts makers will greet President-elect Barack Obama with the same plea they have been making for months: We need help from Washington, and fast.

    GM, the biggest U.S. automaker, must get government aid because ``time is very short,'' said Roger Altman, the former Treasury official advising the company in its merger talks with Chrysler LLC. ``The consequences of a collapse by GM or all three could be very severe,'' Altman, 62, said in an interview.

    The industry's agenda for the new president will be topped by intensified calls for an immediate disbursement of $25 billion in low-interest loans signed into law by President George W. Bush Sept. 30. While the money is supposed to be for the development of fuel-efficient vehicles, automakers argue it should be freed up to meet current capital needs.

    Sympathetic lawmakers also have been calling for auto lenders, if not the manufacturers themselves, to get some of the $700 billion bailout fund set aside for financial institutions.

    ``Time is critical when it comes to availability of capital for this industry,'' said Dave McCurdy, chief executive officer of the Alliance of Automobile Manufacturers, which represents GM, Ford, Toyota Motor Corp. and eight other automakers.

    Needed `Right Now'

    ``That $25 billion is not hitting the street yet, and that's of major import to some of the companies right now,'' McCurdy said.

    GM sought about $10 billion from the government last month, with CEO Rick Wagoner lobbying in person, people familiar with the matter said.

    One or more automaker failures ``would be a difficult way for a brand-new administration'' to take office, said Altman, an Obama supporter whose Treasury Department service included working as deputy secretary under President Bill Clinton.

    Companies dependent on the automakers are also at risk, said Ann Wilson, spokeswoman for the Washington-based Motor and Equipment Manufacturers Association, which represents parts suppliers such as Johnson Controls Inc. and Lear Corp.

    ``We have a lot of members who are having trouble with the credit crisis right now,'' `she said. `We've got to figure out a way to keep the manufacturing base in this country.''

    Plunging Sales

    Automakers and lawmakers are seeking aid amid decade-low auto sales in the U.S. this year and tight credit markets that caused $28.6 billion in first-half losses in 2008 at GM, Ford and Chrysler, owned by Cerberus Capital Management LP. GM said Nov. 3 its October sales plunged 45 percent in what it called the industry's worst month since 1945.

    Obama said in a speech Oct. 13 that funding for automakers should be on a ``fast track,'' and the government should provide ``more as needed.'' During his campaign, he promised to help keep auto manufacturing jobs in the U.S. with measures such as incentives for building vehicles that use less fuel.

    The outcome of the merger talks between GM and Chrysler may hinge on whether the companies can get government aid. The negotiations may intensify this week after the election, according to people familiar with the matter.

    Michigan lawmakers including Representative Joseph Knollenberg started a campaign in October for aid to the auto industry through the Emergency Economic Stabilization Act, which authorizes the Treasury to spend as much as $700 billion to provide liquidity to the credit markets.

    Governors' Letter

    On Oct. 30, six governors from states including Michigan and Ohio sent a letter seeking help for automakers to Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson, saying the economic crisis ``threatens to create an unmanageable disaster at the state level.''

    The highest priority for Obama will be to ``put the United States on the right track for an economic recovery by fixing the credit markets and restoring consumer confidence,'' Ford spokesman Mike Moran said in an e-mailed statement. He declined to comment on specific actions the automaker would prefer.

    A GM spokesman, Greg Martin, didn't respond to an inquiry about key issues for the automaker under the new administration. A Chrysler spokeswoman, Lori McTavish, declined to comment.

    The suppliers association also will work on getting a number of bills passed under the new president, spokeswoman Wilson said.

    Fuel Standards

    One law that has failed to pass this year and may come up again would crack down on the selling of counterfeit products that break intellectual property laws, such as brake pads and tires. Another would provide tax credits for heavy-duty vehicle suppliers that provide safety systems to drivers, Wilson said.

    Fuel-emissions standards in the U.S. and globally will also be an issue for automakers and the Obama administration, McCurdy said. The Corporate Average Fuel Economy standards passed this year require manufacturers in the U.S. to have car-and-truck fleets getting an average 35 miles per gallon by 2020.

    ``We've made a commitment to not only meeting those standards but recognize those standards will continue to rise in the future,'' McCurdy said.

    Obama said during his campaign he wanted to put at least 1 million so-called plug-in hybrid vehicles that would get as much as 150 miles per gallon on the road by 2015. He also said he would give consumers who buy the vehicles a $7,000 tax credit.

    [​IMG]
     
  2. matrix243

    matrix243 My body, is ready.

    Joined:
    May 15, 2001
    Messages:
    18,863
    Likes Received:
    38
    Location:
    Calgary
    maybe just give the full 25.
     
  3. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,748
    Likes Received:
    1,611
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
    Pelosi says Congress considering Big 3 bailout

    David Shepardson / Detroit News Washington Bureau
    Wednesday, November 5, 2008

    WASHINGTON -- House Speaker Nancy Pelosi said Wednesday that Congress is considering bailing out Detroit's Big Three automakers.

    "We may need to make a statement of confidence in our auto industry," Pelosi told NPR this afternoon. "We're not saving those companies, we're saving an industry. We're saving an industrial technological and manufacturing base... It's about jobs in America."

    Pelosi held a meeting Monday with Democratic leaders to consider a request from Detroit's Big Three automakers for another $25 billion in "bridge financing" to help them survive a huge downturn in auto sales this year. "It would be our intention to have some level of recoupment for the taxpayer," Pelosi said.

    She acknowledged that taxpayers could resent "what they consider to be a bailout of inefficiencies" in the auto industry.

    The Detroit News reported on Tuesday that if an agreement is reached to provide more aid, House Democrats will insist that the money come with strings attached, including limits on executive compensation and bonuses.

    Congressional leaders did not agree on a specific amount of aid, and planned to gather more information this week.

    Rep. Dale Kildee, D-Flint, who is chairman of the House Auto Caucus, did not attend Monday's meeting said discussions are underway about another $25 billion in loans for automakers.

    "The industry is in serious trouble and we need to get them the cash as soon as possible," Kildee said Monday.

    Detroit's Big Three automakers have had a strained relationship with House Democrats.

    The two sides sparred over the 2007 energy bill that called for a 40 percent increase in fuel efficiency requirements by 2020. But Pelosi was an early advocate of funding the $25 billion factory retooling program and her support was critical to the program passing Congress in September.

    The Monday meeting included House Majority Leader Steny Hoyer, D-Md., and many committee chairmen, including Reps. George Miller, D-Calif.; Chris Van Hollen, D-Md.; Barney Frank, D-Mass.; James Clyburn, D-S.C.; Xavier Becerra, D-Calif.; and Sander Levin, D-Royal Oak. Rep. John Dingell, D-Dearborn, took part by phone, as did other members on the campaign trail.

    Pelosi designated Miller, chairman of the House Education and Labor Committee, as the point person on the issue.

    Pelosi also discussed the auto issue separately with Sen. Majority Leader Harry Reid, D-Nev., on Monday, aides said.

    Congressional leaders are likely to put out a statement on Friday -- the same day that General Motors Corp. and Ford Motor Co. are expected to announce heavy third-quarter losses.

    http://detnews.com/apps/pbcs.dll/article?AID=/20081105/AUTO01/811050488/1361
     
  4. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,748
    Likes Received:
    1,611
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
    The Big Three met with the House Speaker and Senate Majority leader to discuss the industry's dim outlook and a possible bailout as GM and Ford face Q3 losses.

    Last Updated: November 6, 2008: 7:17 PM ET

    NEW YORK (CNNMoney.com) -- The heads of the three leading U.S. automakers will met with the two top Congressional leaders Thursday afternoon to discuss a possible bailout - one day before General Motors and Ford Motor are expected to report sizable third-quarter losses and reveal painful new cost-cutting measures.

    Executives with knowledge of the meetings said it will focus on preliminary discussions about what was at stake if one or more automakers were to fail. The meeting was also set to include Ron Gettelfinger, president of the United Auto Workers union.

    "The industry needs time and it needs money and it has neither at this point. That's the purpose of meeting," said one executive.

    Among the topics discussed were a $25 billion loan to fund union-controlled trust funds that would be set up in the coming year to cover the health care costs of retirees and their family members. Shifting about $100 billion of those costs from the automakers' balance sheet to the trust funds was a key concession the companies won from the UAW in the 2007 labor deals.

    The discussions also touched upon allowing the automakers to tap into the $700 billion bailout of Wall Street firms and the nation's banks that was passed by Congress last month. Treasury has so far rejected auto-industry inquiries about accessing that pool of money.

    The automakers also renewed their pre-election request to double the $25 billion low-interest loan program approved by Congress, as part of energy legislation, to help automakers convert to making more fuel-efficient vehicles in an effort to meet the demands of car buyers and new federal rules.

    But despite the range of ideas discussed, an executive with knowledge of the discussions said most of Thursday's talks dealt in broad outlines, not details.

    The industry officials first met with House Speaker Nancy Pelosi, D-Calif, then with Senate Majority Leader Harry Reid, D-Nev. Both have said they are open to additional federal help for the automakers.

    "It is essential that we preserve our manufacturing and technology base in this country," said Pelosi, in a prepared statement released by her office following the meeting.

    "Today, the Democratic leadership discussed how to protect hundreds of thousands of workers and retirees, safeguard the interests of American taxpayers, and use cutting-edge technology to transform blue-collar jobs to green collar jobs for generations to come," she said.

    Rep. John Dingell, D-Mich, one of the industry's strongest allies on the Hill, voiced support for offering federal help to the automakers, following the Thursday evening meeting with Pelosi.

    "They are not seeking cash just to spend it," he said. "They are seeking money to invest in jobs and opportunity for American workers and American industry."

    He added: "They made the point that they are going to spend the money they get through these mechanisms in a way that will best serve the long-term productive capacity of the United States and will see to it we have the most jobs and most opportunity for American workers."

    One auto executive said it is not yet clear if the industry will seek help during an expected "lame duck" session of the outgoing Congress later this year or if it will wait for the new Congress and President-elect Barack Obama to take office in January.

    Product development put on hold

    Sources also said the automakers are pushing back product development plans in an attempt to save cash. The move is a desperate one, as it hurts their plans to roll out the more fuel-efficient models they need to reignite sales. But they say they have no choice in the current environment.

    "Everyone's having to do it," said another executive at a U.S. automaker, who spoke on the condition his name not be used. "[Sales have] fallen off a cliff. These are far from normal slow times. We need to do what we're doing in the short-term to address that."

    Both GM and Ford Motor are likely to discuss product development plans Friday when they report their financial results, according to sources.

    Analysts surveyed by earnings tracker Thomson Reuters forecast that GM lost $3.51 a share in the quarter, or about $1.9 billion. Ford is expected to report a loss of 93 cents a share, or $2.2 billion.

    These losses exclude special items. And with the companies looking at possible further cuts in production and payroll, there could be other charges that send losses even higher.

    The situation is clearly dire for Detroit's Big Three - GM, Ford, and privately held Chrysler. Their Asian rivals have been struggling as well.

    Toyota slashed its annual earnings forecast Thursday, saying profits will fall to less than a third of what they were the previous fiscal year. The Japanese auto giant will also post its first annual decline in U.S. sales since it became a major player here. The United States is now Toyota's largest market.

    Automakers reported the worst month of auto sales in 25 years in October and sales are expected to remain weak into next year due to tight credit for consumers and dealers, rising job losses nationwide and battered consumer confidence.

    The crisis in the auto sector has prompted talk about a possible GM-Chrysler merger, one which would lead to the loss of tens of thousands of jobs and further factory closings. Those talks appear to be on hold at the moment, though.

    There had been talk that GM and Chrysler would need federal loans if they were to try to complete a deal. But one of the auto executives said it was unlikely the possibility of a merger was discussed at Thursday's meeting.

    Shares of GM (GM, Fortune 500) closed down 14% Thursday while Ford (F, Fortune 500) ended down 5%. Toyota's (TM) stock closed down 13%.

    http://money.cnn.com/2008/11/06/news/companies/automakers/index.htm?section=money_latest
     
  5. art_VW_shark

    art_VW_shark OT Supporter

    Joined:
    Oct 23, 2005
    Messages:
    156,723
    Likes Received:
    191
    Location:
    Bosstown
    if obama bails them out with our tax payer dollars, he may well earn his socialist tag that many far righters throw around
     
  6. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,748
    Likes Received:
    1,611
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
    U.S. Carmakers Said to Seek $50 Billion in U.S. Loans

    By John Hughes
    Nov. 7

    (Bloomberg) -- General Motors Corp., Ford Motor Co. and Chrysler LLC, strapped for cash as sales plunge, are seeking $50 billion in federal loans to help them weather the worst auto market in 25 years, a person familiar with the matter said.

    The package would be $25 billion for health-care spending and $25 billion for general liquidity that could be delivered in different ways, including short-term borrowing from the Federal Reserve, said the person, who asked not to be identified because the plan isn't public. In return, the companies would be willing to take steps such as granting stock warrants, the person said.

    The automakers should receive ``additional help'' from President George W. Bush's administration, Senate Majority Leader Harry Reid said after meeting with their chief executive officers in Washington yesterday. Congress approved a $25 billion loan program in September to help build fuel-efficient vehicles.

    The three companies, their unions and legislative allies are hunting for aid after a combined $28.6 billion in combined first- half losses. New vehicles sold at a seasonally adjusted annual rate of 10.6 million in October, the lowest since 1983.

    Ford is also among automakers approaching European governments for 40 billion euros ($51.2 billion) in loans, Chief Financial Officer Lewis Booth told reporters today after the company said it used up $7.7 billion more cash from auto operations than it generated last quarter.

    In the U.S., the Bush administration should use its existing authority to provide the help, Reid said yesterday in a statement, without being specific as to the amount. Congress will also continue exploring ways to aid the automakers, the Nevada Democrat said.

    `Immediate Liquidity'

    Spokesmen for the automakers have declined to say how much assistance they're seeking. The UAW said Nov. 5 it backed $25 billion in loans for automakers' health-care costs and other aid for ``immediate liquidity.''

    Analysts estimate that GM also will report a third-quarter operating loss today, after Ford said its loss on that basis was $2.98 billion. The financial demands on the automakers include contributing to UAW-run trusts being created to take over responsibility for retirees' medical bills.

    GM CEO Rick Wagoner, Ford's Alan Mulally, Chrysler's Robert Nardelli and United Auto Workers President Ronald Gettelfinger also met yesterday with House Speaker Nancy Pelosi, a California Democrat. The auto chiefs didn't take questions from reporters.

    `Necessary Funding'

    GM will work with Reid and Pelosi ``to ensure immediate and necessary funding to keep the auto industry viable,'' the Detroit-based automaker said in a statement.

    Nardelli said in a statement Chrysler was ``encouraged'' by the lawmakers' understanding of the importance of the auto industry. Mulally said ``we applaud their efforts.''

    The government wants to ``ensure the viability of this industry,'' Pelosi told reporters before her meeting with the CEOs. U.S. officials also will be ``looking out for taxpayers,'' she said.

    The meeting with Pelosi was ``very positive,'' according to House Majority Leader Steny Hoyer, a Maryland Democrat, who also attended. Hoyer, when asked whether the automakers mentioned bankruptcy, said, ``No, but I'm not going to say anything further.''

    Representative Sander Levin, a Michigan Democrat who also attended, said the meeting ``went very well'' and that the outcome would be ``positive.''

    Obama's Plans

    President-elect Barack Obama said last week he plans to work with the industry to make it more competitive. Obama has called for a $175 billion stimulus package to follow the $168 billion package signed into law in February.

    Automakers, the UAW and state political leaders have sought support from the Energy Department, the Fed, the Treasury Department and from Congress.

    The Energy Department said Nov. 5 it has moved ahead with one piece of automaker aid as it set the interim rules for the $25 billion low-interest loan program, which was crafted to help the companies retool plants to build more-efficient vehicles.

    The government needs to ensure that this money goes for the purposes Congress intended, said Public Citizen, a consumer- advocacy group in Washington.

    The Energy Department ``should not provide loans to upgrade plants that produce performance vehicles,'' Joan Claybrook, Public Citizen's president, said in a statement.

    [​IMG]
     
  7. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,748
    Likes Received:
    1,611
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
    I think the chances of a big bailout and subsidizing increased with today's jobless report.
     
  8. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,748
    Likes Received:
    1,611
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
    Millions of jobs at stake in carmaker woes

    The downfall of one of the Big Three could cost as many as 3 million jobs and $60 billion in the first year, report says.

    NEW YORK (CNNMoney.com) -- With auto sales at the weakest pace in 25 years and a government bailout far from certain, job losses in the struggling industry could potentially get much worse.

    If the Big Three carmakers were to cut U.S. operations by 50%, 2.5 million jobs could be lost in 2009, according to a study released Wednesday.

    The Center for Automotive Research reported that the total employment impact includes nearly 250,000 jobs lost at the automakers and nearly 800,000 at suppliers.
    In addition, the organization estimates another 1.4 million job losses outside the industry, such as those caused when stores go out of business in communities hit by plant closings.

    In economic terms, cutting operations in half would reduce personal income by more than $125.1 billion in the first year, and $275.7 billion over three years, the center said. Such a decline in personal income would cost the government tax dollars -- $49.9 billion in 2009 and more than $108.1 billion over three years.

    Automakers GM (GM, Fortune 500), Ford (F, Fortune 500) and Chrysler employ hundreds of thousands of well-paid workers and support far more retirees and their families with health care and other benefits. In addition, dozens of suppliers and thousands of dealerships depend on the Big Three.

    "The likelihood of one or two of the Detroit Three manufacturers ending operations is very real," David Cole, chairman of the center, said in a statement.

    But a larger fear is a complete shutdown. A 100% reduction in Big Three operations would cost about 3 million jobs in the first year alone.

    "A complete shutdown of Detroit Three U.S. production would have a major impact on the U.S. economy in terms of lost wages, reductions in social security receipts, personal income taxes paid, and an increase in transfer payments," Sean McAlinden, the center's chief economist, said in a statement. "The government stands to lose on the level of $60 billion in the first year alone, and the three year total is well over $156 billion."

    Year to date, the auto industry has announced 110,610 job cuts, more than double than the same period in the year before, and the highest of any industry with the exception of finance, according to a report released Wednesday by global outplacement firm Challenger, Gray & Christmas.

    More than 15,000 layoffs were announced in the automotive industry in October alone, the report said.

    [​IMG]
     
  9. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,748
    Likes Received:
    1,611
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
    Can Washington save the Big Three automakers?

    [​IMG]
    [​IMG]
    [​IMG]

    Nov 8 01:52 PM US/Eastern

    With the Big Three US automakers teetering on the edge of insolvency, it appears Washington may finally be ready to come to Detroit's rescue.
    Only hours after both General Motors and Ford Motor Co. announced large third-quarter losses -- and stressed that they are both rapidly running out of cash -- President-elect Barack Obama focused on the industry's plight during his first news conference since Tuesday's election.

    "I have made it a high priority for the transition team to work on additional policy options to help the auto industry adjust," Obama told reporters gathered in Chicago.

    Just how bad a situation the automakers are facing was hammered home on Friday, when GM reported a 2.5 billion dollar net loss for the third quarter, bringing to nearly 57 billion dollars its losses since the beginning of 2005.

    Ford's 129 million dollar quarterly loss, meanwhile, brought to nearly 24.5 billion dollars the deficit it has run up since plunging into the red in 2006.

    Yet the losses only partially state the true depth of the problem for the automakers.

    Going into the third quarter, GM had 21 billion dollars on its books. By the end of September, that had plunged to 16.2 billion dollars, coming perilously close to the 11 billion to 14 billion dollars it says it needs on hand to keep the company operating.

    Ford burned through 7.7 billion dollars in the quarter, though its reserves are nearly twice as richer thanks to a massive line of credit it acquired last year.

    Though it doesn't report its full financial data, the privately-held Chrysler LLC is also thought to be fast running out of cash: one reason, analysts believe, why its parent, Cerberus Capital Management, was so eager to sell Chrysler to GM.

    That deal, however, was scuttled by GM, and observers believe Cerberus may now rush to find another buyer as the economy continues to worsen.

    "I doubt there's anyone who challenges the fact that we're operating in difficult times, perhaps as difficult as we've ever faced in the auto industry," GM Chairman and CEO Rick Wagoner said during a Friday conference call with reporters and industry analysts.

    Detroit's situation has certainly worsened in the face of the current economic crisis that combines what many describe as a "perfect storm" of factors, such as high fuel costs, tight credit, job losses and rising commodity prices.

    But the seeds of the current crisis date back to the last big oil shock, of 1979, which helped the Japanese gain a foothold for small, fuel-efficient products.

    As gas lines faded from memory, the Asian automakers continued to gain ground by focusing on quality, something GM, Ford and Chrysler have only recently come to grips with -- and with varying degrees of success.

    Further compounding the situation, Detroit has been consciously slow to embrace changes in the American automotive marketplace, especially the shift from big trucks to small, fuel-efficient passenger cars.

    And even where it has, lamented Consumer Reports' auto analyst David Champion, it has needed "more models that were exciting for people to buy."

    Again, Detroit has begun to address that complaint, and a flood of more fuel-efficient -- and exciting -- models are on tap to debut over the next several years. The challenge now will be to keep that flow going.

    GM President Fritz Henderson said Friday the automaker will have to cut back on some product programs in order to ensure liquidity.

    That creates a conundrum, of course: to stay alive, short-term, the Big Three might be curtailing programs that would ensure long-term success.

    So federal aid becomes all the more important, said Joe Phillippi, an automotive analyst and head of AutoTrends Consulting.

    "Both the current administration and the incoming administration recognize it will take at least 50 billion dollars to tide the automakers over through 2009, when they start to get some labor cost relief, and an improvement in demand," he told AFP.

    Obama said Friday he would push Congress to accelerate the delivery of 25 billion dollars in loan guarantees aimed at helping automakers develop more fuel efficient vehicles ahead of upcoming regulation.

    The Big Three asked for another 25 billion in loan guarantees for more general expenses during a meeting with top lawmakers in Washington Thursday.

    "Automakers need immediate funding to stay on track during this difficult time," said National Association of Manufacturers president John Engler.

    "We're talking about close to a million jobs in America -- we're talking about a lasting impact on our industrial production in the United States. We simply cannot afford to let the auto industry fail."

    [​IMG]
     
  10. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,748
    Likes Received:
    1,611
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
    GM Says It May Run Out of Operating Cash This Year

    By Jeff Green and Mike Ramsey

    Nov. 7 (Bloomberg) -- General Motors Corp., seeking federal aid to avoid collapse, said it may not have enough cash to keep operating this year and will fall ``significantly short'' of the amount needed by the end of June unless the auto market improves or it raises more capital.

    The largest U.S. automaker reported a $4.2 billion third- quarter operating loss today and said its available cash fell to $16.2 billion on Sept. 30 from $21 billion at the end of June. Merger talks with Chrysler LLC were suspended.

    ``GM is making a pretty direct plea for help,'' said Pete Hastings, a fixed-income analyst at Morgan Keegan Inc. in Memphis, Tennessee. ``The message is, `we've done all the things we can do, and we need help.' And if we don't get help, fill in the blank.''

    The cash drain reflected the strain of a 21 percent slump in U.S. sales in the quarter as the credit freeze deepened. It also added urgency to U.S. automakers' request for government aid. The companies are asking for $50 billion in new loans, a person familiar with the proposal said.

    Chief Executive Officer Rick Wagoner and the CEOs of Ford Motor Co. and Chrysler renewed the push for assistance yesterday in meetings with U.S. House and Senate leaders in Washington. Wagoner said GM also has been in contact with the staff of President-elect Barack Obama.

    GM rose 44 cents, or 9.2 percent, to $4.36 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have tumbled 82 percent this year.

    $73 Billion in Losses

    Today's outlook was the bleakest yet from the automaker, which has lost almost $73 billion since the end of 2004. Using $6.9 billion in cash last quarter pushed GM closer to the $11 billion minimum it says is needed to pay bills.

    A bankruptcy filing ``would be a disaster far beyond General Motors and a sad chapter in American history,'' Wagoner, 55, said in a Bloomberg Television interview. GM said on Oct. 24 that bankruptcy ``is not an option.''

    Should GM take such a step, the result would be 2.5 million jobs lost in the first year among automakers, suppliers and related businesses, according to a Nov. 4 report by the Center for Automotive Research, based in Ann Arbor, Michigan. Ford, which reported using $7.7 billion in cash last quarter, said today it has ``sufficient liquidity.''

    Bailout Optimism

    A U.S. rescue package for GM, Ford and Chrysler is likely before President George W. Bush leaves office in January, said Dennis Virag, president of Automotive Consulting Group in Ann Arbor.

    ``Either the federal government provides money for a bailout and lets the industry retool, restructure, and move ahead, or the industry dies,'' Virag told Bloomberg Television.

    While GM didn't specify any prospective partners in saying merger discussions were being halted, the biggest U.S. automaker had been in negotiations on a tie-up with Chrysler, according to people familiar with the plans.

    Consideration of a strategic acquisition was ``set aside'' to focus on ``immediate liquidity challenges,'' Detroit-based GM said in a statement.

    Chrysler CEO Robert Nardelli, who hadn't acknowledged the talks, sent a note to employees that included the wording of GM's statement. The company, owned by Cerberus Capital Management LP, will ``continue to explore multiple strategic alliances or partnerships,'' Nardelli said.

    GM Loss, Estimates

    GM's per-share operating loss was wider than the average estimate on an adjusted basis of $3.94, based on 10 analysts surveyed by Bloomberg.

    Including a non-cash, $4.9 billion one-time gain related to unloading retiree medical bills, GM had a net loss of $2.5 billion, compared with a $38.9 billion year-earlier loss on a tax-accounting charge.

    GM's cash use in the fourth quarter should be closer to the levels in this year's first and second quarters, when it was about $3.6 billion, Chief Financial Officer Ray Young said on a conference call.

    GM said it is trying to boost cash by $20 billion by the end of next year, an increase from a July 15 plan for $15 billion.

    Asset sales, a part of the strategy, have been hampered because potential buyers can't get financing, Chief Operating Officer Fritz Henderson said. GM's Hummer brand of sport-utility vehicles is among the businesses on the block.

    Paring Spending

    Capital spending is being trimmed in 2009 to $4.8 billion, down $2.4 billion, by delaying the debut of some vehicle programs in North America and Europe by as long as a year. GM will also save $1.5 billion by cutting advertising and dealer promotion support and by reducing production starting next quarter.

    GM will further pare engineering and cut back on discretionary expenses, including travel, consulting and unscheduled overtime.

    Working-capital spending will be reduced by $500 million by lowering reserves of parts and inventory, the company said. GM also said it will try to slash 30 percent of salaried-workforce expenses, up from a goal of 20 percent.

    GM will protect the capital budget for the electric Chevrolet Volt and the Chevrolet Cruze compact car, Henderson said on a conference call.

    GM's debt rating was lowered by one grade to CCC+ by Standard & Poor's, which said it was ``cautious'' regarding GM's ability to raise capital.

    Ceding a Crown

    The latest retrenchment for GM comes two months after its 100th birthday. After 77 years as the world's largest automaker, it is poised to be surpassed in 2008 global sales by Toyota Motor Corp. It employs about 266,000 people around the world with factories in 34 countries.

    Today's release on GM's results was delayed 48 minutes past its scheduled 10:30 a.m. arrival because of the need for a wording change, said Julie Gibson, a spokeswoman.

    GM's $3 billion of 8.375 percent bonds due in July 2033 fell 4.3 cents to 24 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields 34.83 percent.

    Credit-default swaps protecting against a GM default for one year rose to a level that implies the market has priced in a more than 66 percent chance of default, according to CMA Datavision.

    One-year credit-default swaps were quoted at a mid-price of 51 percentage points upfront, compared with 50 percentage points yesterday, CMA data show. That means it would cost $5.1 million initially in addition to $500,000 over one year to protect $10 million of GM bonds. The contracts reached as high as 52 percentage points upfront on Oct. 16.

    [​IMG]
     
  11. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,748
    Likes Received:
    1,611
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
  12. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,748
    Likes Received:
    1,611
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
    Reid, Pelosi Urge Treasury to Extend Aid to Automakers

    By Lori Montgomery
    Washington Post Staff Writer
    Sunday, November 9, 2008; A01

    With the nation's automotive industry hemorrhaging cash, congressional leaders called on the Bush administration yesterday to offer government assistance to the car companies as part of the Treasury Department's $700 billion emergency rescue program.

    The call came one day after General Motors, the nation's largest auto manufacturer, announced another multibillion dollar loss for the third quarter and said it was running out of money fast. Ford, the second-biggest car company, also reported heavy losses. Unless the government steps in, analysts warned, GM could face bankruptcy, endangering the livelihoods of about 100,000 North American autoworkers and hundreds of thousands of others whose jobs depend on the industry.

    In a letter to Treasury Secretary Henry M. Paulson Jr., House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry M. Reid (D-Nev.) asked Paulson to "review the feasibility . . . of providing temporary assistance to the automobile industry during the current financial crisis."

    The letter notes that Congress granted Paulson broad discretion to use the bailout money to "restore financial market stability. A healthy automobile manufacturing sector is essential to the restoration of financial market security," the letter continues, as well as to "the overall health of our economy, and the livelihood of the automobile sector's workforce."

    If the request is granted, it would expand the federal government's role in private enterprise far beyond the financial sector. Critics have warned that a bailout of GM would attract a long line of other companies to Washington to argue that their survival, too, is critical to the economic health of the country. The move would push the Bush administration to decide winners and losers in yet another huge sector of the economy, and it would force President-elect Barack Obama to manage a complex restructuring of the ailing automotive industry.

    The Treasury has so far declined to assist the automakers, which have been devastated by the twin shocks of a collapsing credit market and the sharpest drop in auto sales in more than two decades. But as the news from Detroit has grown increasingly grim, lawmakers from both parties, Michigan officials, auto industry executives and labor leaders have stepped up their campaign for federal aid.

    A plan is in the works at the Treasury to use bailout money to take ownership stakes in a wide array of companies beyond the banking sector. But Treasury officials have indicated that participants in its recapitalization program must be financial firms subject to federal regulation. That means GMAC, GM's auto financing arm, may be eligible for quick help, but GM itself may not.

    The rescue legislation gives Paulson authority to consider the automakers for future programs, such as auctions to purchase troubled assets. But the Treasury has yet to establish rules for those programs, which means such help could be months away.

    Treasury officials declined yesterday to comment directly on the request from Reid and Pelosi.

    "We continue to work on a strategy that most effectively deploys the remaining funds to strengthen the financial system and get lending going again," Treasury spokeswoman Jennifer Zuccarelli said.

    In recent days, top auto industry executives have been making the rounds in Washington, trying to shake loose federal cash from a variety of sources. And there are strong indications that Democrats, newly empowered in Tuesday's election, are inclined to oblige.

    Obama and other key Democrats vowed during the campaign to support as much as $50 billion in low-interest loans for the car companies. On Friday, during his first news conference since his election as president, Obama spoke at length about the "hardship" the industry faces and referred to the auto industry as "the backbone of American manufacturing."

    Obama's team of economic advisers includes Michigan Gov. Jennifer Granholm (D) and former Michigan congressman David Bonior, who is considered a strong candidate for Labor secretary. With Granholm on stage with him Friday, Obama said his transition team is already working on "policy options to help the auto industry adjust, weather the financial crisis and succeed in producing fuel-efficient cars," either under existing law or through the passage of "additional legislation."

    In the meantime, however, the automakers have gotten little but sympathy. Congress recently voted to fund a $25 billion low-interest loan package intended to help the car companies retool their factories to produce fuel-efficient vehicles that meet tough new emissions standards. But that money has been hung up by red tape. Obama and other Democrats have discussed providing another $25 billion in loans, bringing the total federal aid to $50 billion. But unless the Bush administration agrees to work on an economic stimulus package when Congress returns to Washington later this month, that money would have to wait until at least January.

    Analysts fear the firms may not be able to hold on that long. GM and Ford posted big losses Friday as they continued to pay out more in salaries and other expenses than they are taking in from sales. GM said it would cut spending and sell some product lines but nonetheless expects to "fall significantly short" of the cash it needs to operate next year. The failure of GM or one of the other Detroit automakers could wipe out 2.5 million jobs and $125 billion in personal income in the first 12 months, according to a report released this week by the Center for Automotive Research.

    This is not unfamiliar territory for the auto industry. In 1979, Chrysler nearly went bankrupt and lobbied the government for assistance. A $1.2 billion loan, coupled with deep executive pay cuts and major union concessions, helped turn the troubled company around. Under Lee Iacocca, Chrysler invented its iconic minivan, popularized the SUV and repaid the loan in four years. The government even made money off the deal.

    Asked Friday whether future assistance could mirror the Chrysler bailout, GM executives told investors that they consider the Treasury program a more modern means to solving the crisis.

    In their letter to Paulson, Reid and Pelosi wrote that Friday's earnings reports "only reaffirm the need for urgent action."

    If the Treasury does decide to assist the auto industry, they wrote, its chief executives should be subject to the same "limits on executive compensation" as other participants in the program and should be required to give the government equity stakes in their firms "to provide taxpayers a return on their investment upon the industry's recovery."

    Spokesmen for Ford and GM issued statements thanking the lawmakers for their request.

    "We appreciate Congress recognizes the urgency to help the auto industry weather this troubled economic period," GM spokesman Greg Martin said. "We hope Congress and the administration can work together to provide immediate aid."

    [​IMG]
     
  13. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,748
    Likes Received:
    1,611
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
    Obama set to push ‘big bang’ reform package

    By Edward Luce in ‘Washington
    Published: November 9 2008 19:17 | Last updated: November 9 2008 19:17

    US President-elect Barack Obama intends to push a comprehensive programme of social and economic reform beyond an immediate emergency stimulus package, Rahm Emanuel, the next White House chief of staff, indicated on Sunday.

    Mr Emanuel brushed aside concerns that an Obama administration would risk taking on too much when it takes office in January. He said Mr Obama saw the financial meltdown as an historic opportunity to deliver the large-scale investments that Democrats had promised for years.

    Tackling the meltdown would not entail delays in plans for far-reaching energy, healthcare and education reforms when all three were also in crisis, he said. “These are crises you can no longer afford to postpone [addressing].”

    Mr Emanuel, Mr Obama’s first appointment after his emphatic victory over John McCain last week, added that Mr Obama would push hard during the 11-week transition before he is inaugurated for early assistance to the collapsing US car industry, which he described as “an essential part of our economy”.

    His comments increased pressure on George W. Bush to approve a widely-touted $25bn emergency package for Detroit – possibly as part of a second emergency stimulus package to stave off further decline in the rapidly deteriorating US economy.

    Mr Obama will meet Mr Bush on Monday and is likely to seek the outgoing president’s reassurance that he would not veto any stimulus package that could be passed as soon as next week when Congress meets for a “lame duck” session.

    [​IMG]
     
  14. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,748
    Likes Received:
    1,611
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
    Auto Makers Force Bailout Issue

    [​IMG]

    Government Finds It Difficult to Deny Aid to Detroit in Wake of Wall Street

    GREG HITT in Washington and JOHN D. STOLL in DetroitArticle
    NOVEMBER 10, 2008

    The auto-industry crisis is forcing a broader debate over how far the government should go to prop up ailing industries, as the Bush administration resists Democrats' request to use part of the $700 billion financial-rescue fund to aid Detroit's three struggling car makers.

    House Speaker Nancy Pelosi of California and Senate Majority Leader Harry Reid of Nevada, in a letter Saturday, formally requested that Treasury Secretary Henry Paulson consider giving "temporary assistance to the auto industry" using money originally appropriated to shore up the banking system.

    The Democratic lawmakers said federal aid should come with "strong conditions," such as requirements that car makers build more fuel-efficient vehicles, and equity stakes for the government so taxpayers could profit if the companies recover.

    Senior economic advisers to President-elect Barack Obama said he broadly backs the appeal by Mrs. Pelosi and Mr. Reid on behalf of the auto industry. Mr. Obama, who on Friday called the industry "the backbone of American manufacturing," is scheduled to meet President George W. Bush at the White House Monday.

    Rahm Emanuel, chief of staff for Mr. Obama, said Sunday on ABC's "This Week" that Mr. Obama wants the government to move faster to release $25 billion of low-cost federal loans already approved for the auto industry. He said the Bush administration has other authorities it should "use at this immediate time," but didn't specifically call on it to tap financial-rescue funds to help Detroit.

    So far, the administration has balked at pleas from auto makers and their allies on Capitol Hill to use money from the Treasury's Troubled Assets Relief Program, or TARP, to help companies outside the financial sector.

    "It was not set up for anything else," said Bush spokesman Tony Fratto. He said the only assistance authorized by Congress for the auto industry is a $25 billion loan package meant to help the industry retool to meet higher fuel-economy standards.

    Auto-industry executives and the UAW president seek more federal money, putting lawmakers on the spot after their move to rescue Wall Street.
    Auto-industry officials and allies are concerned that the rules governing the retooling loans are too strict, requiring that companies accepting the money meet standards of "viability" -- which might exclude money-losing General Motors Corp., Ford Motor Co. and Chrysler LLC.

    GM warned Friday that it might not have enough cash to operate its business by the middle of 2009. Tapping into the $700 billion would be the fastest way to inject government cash into the sector, since doing so wouldn't require action by Congress.

    Aides said Mr. Obama's economic-transition team is looking into a more flexible definition of "viability" for the $25 billion program.

    The push by the Detroit Three for more federal money underscores a bigger problem that will confront the Obama administration and Congress: After riding to Wall Street's rescue, the government could find it hard to refuse other industries seen as teetering on collapse.

    Detroit auto executives told top lawmakers last week that the collapse of one or more of their companies would have economywide consequences, putting as many as three million jobs at risk.

    Democratic leaders want to convene a lame-duck session of Congress in two weeks to begin dealing with the nation's economic challenges.

    Mrs. Pelosi has suggested a short-term stimulus package of as much as $100 billion, including spending for road and bridge projects, extended jobless benefits, funds to help states cover Medicaid costs and food assistance for low-income families. An auto-industry bailout could be added to the stimulus package, or moved separately.

    But the Democratic leadership is waiting for a signal from the White House that Mr. Bush would sign a new stimulus bill.

    Aside from questions about the wisdom of government intervention or putting taxpayer money at risk, bailing out Detroit could put Washington in the position of subsidizing job losses. The car makers have at least 10 assembly plants more than they need to meet demand, according to Oliver Wyman Consulting. That translates to roughly 30,000 factory jobs plus significant numbers of engineers and other salaried personnel. GM estimates it needs to slash its salaried-employee costs in North America by 30%.

    Car makers would likely use federal money to subsidize these job cuts, buying out older workers to make room for new, lower paid replacements.

    United Auto Workers President Ron Gettelfinger has said more union concessions are out of the question, union lobbyist Alan Reuther said in an interview with Dow Jones Newswires on Friday. "We feel we've already stepped up" by giving ground last year on future workers' pay and benefits and retiree health care, Mr. Reuther said. The UAW wants assurances a bailout would help secure its members' retirement and health-care benefits.

    "Certainly we're speaking to the UAW," a senior Obama aide said Sunday.

    —Jonathan Weisman and Joshua Mitchell in Washington contributed to this article.

    [​IMG]
    Auto-industry executives and the UAW president seek more federal money, putting lawmakers on the spot after their move to rescue Wall Street.


    http://online.wsj.com/article/SB122616278065311225.html
     
  15. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,748
    Likes Received:
    1,611
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
    GM's Shares Tumble on Rising Cash Concerns

    [​IMG]

    By JENNIFER HOYT
    NOVEMBER 10, 2008, 12:26 P.M. ET

    General Motors Corp.'s shares Monday plummeted to a price it hasn't seen since 1946, on rising concerns the auto maker will run out of cash in the next few months and that any government bailout won't be beneficial to shareholders.

    Shares of GM fell 23% to $3.34 in late-morning trading, after earlier hitting a 62-year low of $3.02, as analysts at both Barclays Capital and Deutsche Bank cut their target prices and investment ratings on the stock.

    Barclays now targets GM shares at $1, while Deutsche Bank slashed its target price to zero.

    Jeff Embersits, chief investment officer of Shareholder Value Management, said GM's freefall reflects investors' growing concern about the company's liquidity, and how little faith the market has in the benefits that a government bailout would have for shareholders. Another problem with the potential bailout, Mr. Embersits added, is that it may cause foreign auto makers to ask their governments for similar aid. If this occurs, it will wash out the benefits of any aid to GM.

    Barclays Capital cut its rating on GM to "underweight" from "equalweight", saying the company will probably burn through its existing cash by February, necessitating a bailout that is likely to come at a big cost to existing shareholders.

    "While further government assistance would decrease the likelihood of a GM bankruptcy, we believe any government assistance would likely significantly dilute GM's equity," analysts at Barclays Capital said.

    Deutsche Bank analysts, who cut their rating on the stock to "sell" from "hold," gave GM a shorter liquidity timeline, saying the company might not be able to fund its operations beyond December. Even with government intervention, the analysts said GM's future is "bankruptcy-like," and shareholders are unlikely to get anything.

    Unicredit also said GM faces an imminent cash crisis. It said that, by extrapolating the average monthly $2.3 billion cash burn of the last 12 months into the future, without government intervention, GM will completely run out of cash by the end of April. Unicredit maintained its sell recommendation on GM bonds, given the risk of a liquidity crisis at the company in the near future and the further declining recovery values for senior unsecured bondholders.

    GM Friday posted a net loss of $2.5 billion in the third quarter, and said it ran through $6.9 billion in cash, leaving the auto maker with only a thin cushion between its current cash reserves and the minimum funding requirements for day-to-day operations. The auto maker said it is scrambling to add $5 billion of new cost cuts to an already aggressive plan to bolster liquidity, and it is seeking to raise new financing from banks, private investors and through a government bailout.

    http://online.wsj.com/article/SB122633261247513857.html?mod=yahoo_hs&ru=yahoo
     
  16. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,748
    Likes Received:
    1,611
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
    An Open Letter to President-Elect Barack Obama

    By Ken Elias
    November 10, 2008

    Dear President-elect Obama,

    Upon taking office, you will immediately face some tough decisions about the future of the government’s role in “saving” Ford, GM and Chrysler. As you know, the Detroit-based automotive industry has already bent the ears of your political colleagues, particularly Speaker Pelosi and Senate Majority leader Reid. These Democratic leaders in Congress seek membership approval to provide taxpayer dollars to prevent these automakers from impending collapse. While we respect the efforts of Congressional leadership, and we share their desire to enhance and protect America’s industrial base and employment therein, we ask that you spare a moment to listen to the opinions of people who do not share their belief that massive federal funding will achieve these goals. First, our qualifications.

    We have been involved with the American automobile industry for decades. We are factory workers, designers, engineers, managers, mechanics, dealers, part suppliers, enthusiasts, journalists, and consumers. Together, we represent the combined voices of the “front lines” of our industry. We are loyal to our country’s economic self-interest and seek but one outcome: an American auto industry that builds vehicles admired and desired by the American public.

    Over the last three decades, for reasons too numerous to elaborate, the majority of Americans (especially passenger car buyers) have switched their loyalties to foreign-owned brands. You will hear various explanations for this failure from the men in charge of Detroit: unfair foreign trade, currency manipulation, fuel economy regulations, health care costs, union collective bargaining agreements, the current credit crisis and more. We urge you to discard these explanations and only look at sales trends for the past three decades. Again, for whatever reasons, American consumers mostly abandoned Detroit.

    By the same token, American automakers abandoned their customers, by failing to invest its profits in flexible assembly techniques, new powertrains and platforms, and better design. By failing to spread their investments in a range of vehicles to meet consumer needs, or fully embrace the fuel efficient future that Congress has dictated. To rectify this situation, urgent action is required. But you, as president-elect, must face this crisis with a clear understanding of the limitations you face.

    First, accept the fact that jobs will be lost no matter what you do. The American automobile industry has too many products, brands, bureaucrats and dealers relative to the size of its market share. Until it can recapture– or at least maintain– market share, it will continue to contract. As any process of recovery will be slow and arduous, Ford, GM and Chrysler will have to shed thousands more jobs. With or without federal aid, this “downsizing” should continue, and sometimes with less than gracious outcomes.

    Second, admit that Chrysler has no future. Actually, it had no future when Daimler sold it to Cerberus. Worse, Cerberus never had any intentions to invest the capital necessary to make a go of it. It has no future products in the pipeline today, and hence is undeserving of rescue. To best protect Chrysler’s past and present employees’ pensions and interests, Chrysler must be allowed to fail and be liquidated. At least some jobs will be saved as the company’s best assets get sold to other automakers, and proceeds will be returned to the debtor’s estate for apportionment among its stakeholders.

    Third, understand that GM and Ford needs bespoke funding solutions. Your administration would be well advised to create a menu of funding options, each with different levels of security interest and control assumed by the federal government. Ford and GM’s executive management and their Boards will have the option to choose among a variety of solutions to resurrect their companies’ fortunes. If an initial solution does not work, any return to menu will incur significant costs and dilution. A “one size” solution to the problems of both automakers is not wise and simply doesn’t work.

    For example, the cash needs of GM vastly outweigh those of Ford. GM does need a massive financial restructuring, Ford doesn’t. Taking a few billion here and there at GM won’t restore profitability at the company, it just prolongs the agony. Any analyst will tell you that GM needs perhaps $25 to $50b as part of a proper restructuring that includes a major “cramdown” on all stakeholders (including the United Auto Workers’ health care association). This “last resort” menu option then gives the taxpayers a significant interest in the company in return for the cash, with a small piece left for the creditors. And as its largest stockholder of sorts, the Feds get to call most of the shots at GM.

    At Ford, the company has done most of the work necessary to restructure itself to long-term profitability in the near future – when auto sales come back to trend if not sooner. The amount of government assistance needed to ride through the crisis is considerably less than what’s required at GM. As a result, Ford will take a different menu option. Less money taken with less risk to taxpayers means less government influence and equity dilution for existing stockholders.

    Fourth, the current management team at GM must be replaced, even if GM selects the lowest funding level option off the menu we prescribe. While we do not believe that government should involve itself in the highest levels of American enterprise, if it does, it should do so whilst protecting the financial interests of the American taxpayer. Any funds to GM must come with a wholesale revamping of this company’s Board of Directors and its senior management team.

    Fifth, do not fall into the political trap of demands made by the UAW as deserving of a bail-out of their VEBA plan, regardless of what happens to each of the Detroit Three. The UAW itself is a business, with its own motivations for profit (for its members) and metrics of success. Its fortunes must rise and fall with its respective employers and not be treated as an independent party at the political bargaining table for government funding. If you grant a payout to the UAW, you set a future course for enterprise in this country that has long term negative consequences by insuring employment stability. Russia abandoned that principal two decades ago and for good reason.

    We wish you all the best for your future and that of our country.
     
  17. art_VW_shark

    art_VW_shark OT Supporter

    Joined:
    Oct 23, 2005
    Messages:
    156,723
    Likes Received:
    191
    Location:
    Bosstown
    the rumor that GM is running out of operating cash is really scary, but I am principally opposed to bailing out private business
     
  18. kngrsll

    kngrsll F1 Crew

    Joined:
    Sep 3, 2003
    Messages:
    559
    Likes Received:
    0
    Location:
    Sptg, SC
    if they could build a decent car, they would get a bail out. people would actually buy their damn cars...
     
  19. TriShield

    TriShield Super Moderator® Super Moderator

    Joined:
    Jul 6, 2001
    Messages:
    132,748
    Likes Received:
    1,611
    Location:
    PRESIDENTIAL TOWER, GREAT AGAIN, NY
    They build plenty of decent to excellent cars that are passed over. For whatever reason a growing majority of our country doesn't care and has no interest in supporting our own businesses.

    Funny thing is people now buy Hyundai and Kia cars, whereas not so long ago they sold some of the worst cars on our roads.
     
  20. amill94

    amill94 OT Supporter

    Joined:
    Oct 5, 2003
    Messages:
    31,217
    Likes Received:
    345
    IF they didn't have to cave into the ridiculous demands of the worker's unions this wouldn't be that big of an issue. The amount of money assembly line people make is way too high. Then the payments for health care and pensions for retired workers pile on to slowly suffocate the company. GM has dramatically increased quality control over the past few years. Granted, it's not up to par with many import brands, it's getting better. FWIW, I don't own a GM or American car.
     
  21. JM Popaleetus

    JM Popaleetus OT Supporter

    Joined:
    Feb 4, 2007
    Messages:
    49,359
    Likes Received:
    33
    Location:
    Connecticut
    You are correct about the assembly line workers asking for too much. I did something similar over the summer for $10 an hour and felt that was more then enough.

    #2, There is NO more retiree healthcare.
     
  22. Need to get the word out that new American cars quality is just as good as Japanese cars, I will never buy a foreign car.
     
  23. z284pwr

    z284pwr OT Supporter

    Joined:
    Jun 16, 2002
    Messages:
    8,011
    Likes Received:
    37
    Location:
    Fruit Heights, Utah
    In my opinion I think the cars from the 80's and 90's really ruined their reputation and maybe for good. While yes, they did release some majorly bad ass vehicle, the majority of their cars were pretty lack luster. While they have definitely taken some major steps to improve their cars, It may not be fixable at this stage. I think they relied to much on truck sales and the gas prices crumbled the sales of them, they were basically hung out to dry as people don't think they offer good cars and they are all like they used to be.

    Like you said, people don't seem to care to support our own business, Hyundai and Kia were shit cars indeed, and yet, people still give them a second chance? Maybe they just weren't around long enough to earn the bad reputation over a long period of time? :dunno:
     
    Last edited: Nov 10, 2008
  24. amill94

    amill94 OT Supporter

    Joined:
    Oct 5, 2003
    Messages:
    31,217
    Likes Received:
    345
    As of today. Too little too late.
     
  25. art_VW_shark

    art_VW_shark OT Supporter

    Joined:
    Oct 23, 2005
    Messages:
    156,723
    Likes Received:
    191
    Location:
    Bosstown
    Perception is everything. GM needs to make a huge comeback people out of the enthusiast circle notice
     

Share This Page