auto bailout thought

[Nords]

WOW......that would make Honda and Toyota sit up and notice if something like that was built in the US.........

I think that kind of plant has already been built in the U.S.-- by Honda and Toyota.

 

[Rustward]

... Wonder what Gettelfinger drove? Probably a Lexus........

I have kinda been hoping that the big 3 would get Gettelfinger to be a little more cooperative. Yep, probably a Lexus.

 

[Rustward]

Chevy - entry level, lower priced cars and trucks

Buick - mid size, more goodies

Cadillac - loaded luxury (here's where the $50K Tahoes and stuff should be sold)

You could keep Corvette as a seperate division under Cadillac, offering luxury and performance.......

Saw somewhere that many Pontiac drivers eventually become Buick owners which would make Pontiac kind of a feeder for Buick. The opinion was that they go together.

 

[charlie]

A couple of more thoughts after discussing this with my liberal friend, who started the conversation with how come we can give AIG 100 Billion and can't give the the big 3 35 billion or whatever today's price tag is. AIG doesn't make anything the Big 3 make cars.

I said good point and than went through a number of arguments.

The two that actually had worked were

1. Shortly after my warranty expired on my Accura I got mailers from 3rd party company offering extended warranty for my car like Warranty Direct. I didn't check the price but I don't think they are super expense a couple of thousand??

Why not have Uncle Sam provide a guarantee that they will honor a warranty of the Big 3 cars. That gets rid of the argument that consumers won't buy from a bankrupt car company and clearly there is a 3rd party industry that already handles this. Albeit not on GM's scale but it would certainly provide work for GM dealers. Say it cost $2K/car and the big 3 make 10 million cars while in bankruptcy the cost to Uncle Sam is only 20 billion, cheap by comparison.

The second argument which worked was this. A speculator can buy GM debt at roughly $.25 on the dollar, e.g an 8% GM bond for $250 meaning that they are collect 32% interest with the potential of a 4x return if the company is still in business 10 or 20 years from know.

As long as GM is out of bankruptcy the speculator collected their ridiculous interest rate at the taxpayers expense. Once bankruptcy happens no more interest payments to speculators (or other bondholders for that matter). Eventually the bankruptcy court sorts out who gets paid what and what percentage of new GM stock each bondholder, suppliers, banks etc own.

Uncle Sam providing the bankruptcy financing is also a reasonable compromise but the only way GM survives is it has to stop paying interest on its debt.

Maybe if the gov guarantees the warranties of the Big 3 we could afford to let them go into chapter 11. I think a total restructuring of the business to get rid of the legacy costs is the only way for survival. Some fair way to restructure the legacy cost is also needed (gov help?).

Another off-the-wall I had was just let the gov buy Chrysler and convert it to production of military and gov vehicles. This would help remove the "national security" argument. I bet Chrysler could be had for a song.

Cheers,

Charlie

 

[clifp]

As a taxpayer, I'd be willing to have the gov't provide debtor-in-possession financing for a Ch 11 bankruptcy, IF we had a prior agreement on these points: The stockholders get wiped out; the long-term bondholders trade 100% of their debt for equity; the UAW workers get a contract equivalent to Toyota's cost; all retirees pay significantly more for their health insurance; white collar workers get something similar to Toyota; senior management works for $1 per year plus stock.

I'd vote for that and I suspect that most informed Americans would also.

Sadly, most Congressman either are not informed or more likely believe they'd piss off too many important people to do something sensible.

According to the WSJ, bloggers most likely Bush is going to give them $10 billion so they won't go broke before Jan 20....

 

[Notmuchlonger]

Take the best from the big 3. Combine them make one company Damn I feel dirty.

 

[FinanceDude]

Take the best from the big 3. Combine them make one company Damn I feel dirty.

And use non-UAW workers??

 

[haha]

Throw in inferior quality,and you have where we are now..."The Perfect Storm"..........

This is getting old, Dude. Ford at least has as many CR top rated cars as any Asian manufacuturer, more than most, and way more than any European manufacturer.

The problem is not quality, at least with Ford, it is cost structure and marketing ineptitude.

My ex wife was making a long commute to graduate school. She put over 200,000 miles on an '88 Taurus, with minimal upkeep.

Ha

 

[lets-retire]

did GM or Chrysler do anything similar? just curious...

Yes. GM did it with the Camero. Or at least are planning to. Chrysler is doing it with the Challenger.

 

[thefinancebuff]

The bankruptcy process is there exactly for this purpose. Several large airlines went bankrupt in recent years. They kept flying during reorganization. Then they came out of bankruptcy.

 

[MichaelB]

The problems in Detroit are not simple - otherwise they would have been resolved. They are deep rooted and mostly the result of an investor-driven culture that obsesses with short term results which are then massively over-compensated.

I also think the big 3 CEOs are in Washington asking for money not because they need it but because our political leaders are allowing it. In fact, they love it. Over $1T so far and more to come. No criteria, no scrutiny, no accountability, no agreed-on limit or total budget. AIG alone has more than $100B. This is a politicians dream come true. This isn't going to stop anytime soon.

Michael

 

[Rustic23]

I agree with MichaelB. Come next election cycle, guess who is going to be calling on Detroit for contributions?

This issue, like many in the press, disgust me! We are fed half truths as truth. Things like 'No one will buy a car from a company in Chap 11' with no real data to back that up.

While no one is talking about letting the US auto industry go out of business, it is reported as though the auto companies would file Chap 7 (liquidation) vs Chap 11 (reorganization). Tens of millions of job losses. Well not in Chap 11, but hey so what, if they do file Chap 7 the headline is true, and besides it sells more papers, scares the average guy, and supports our agenda!

 

[Zathras]

Without aid, GM (at least) CAN'T file for chapter 11 as they can't secure the financinng to support a reorganization.
They are 46 Billion in debt to creditors.
The 3 Million jobs number I have heard is, I suspect, a stretch of epic proportions.
However, what people that throw around that number fail to say, is that if the companies are bailed out and become competitive again, how many jobs will that mean?
Think of it, many have said that the dealer networks are too big. Ok, if they shrink, how many jobs is that? More robots in factories? That means fewer workers, doesn't it?

 

[Midpack]

Without aid, GM (at least) CAN'T file for chapter 11 as they can't secure the financinng to support a reorganization.
They are 46 Billion in debt to creditors.

Agreed, but what if GM enters Chpt 11 with the Fed as the creditor? Can Congress do that, why "certainly" says Curly.

What if any downside would there be vs an outright bailout?

 

[Zathras]

Agreed, but what if GM enters Chpt 11 with the Fed as the creditor? Can Congress do that, why "certainly" says Curly.

What if any downside would there be vs an outright bailout?

I agree, I think that is the best solution. I should have added, 'without aid'.
I feel this would allow GM to do the necessary restructuring to become a viable company.