Bailing out failed companies is the worst idea ever foisted off on the American people. These businesses are failing because they are poorly run, don't fill a need, or charge more than the market will support for their products. Let them flounder for a while, and they will get rid of greedy, overpaid CEOs, cut the fat out of their budgets, revamp their products to make them more marketable, and save themselves. If you reward inefficiency, greed, overpricing, poor management, they will keep coming back to the trough over and over again. Chrysler is a good example of this. If they fail, they will be replaced by better operated companies who can and will do the job. The financial institutions who have been bailed out have continued throwing away money on a grand style for golden parachutes for the very executives who caused the problem and grand parties for them. What a scam!
If the Big 3 fail.......Doesn't that leave Toyota, Nissan, & Maz
along with Kia, Hyundai, BMW, etc all with manufacturing plants employying American workers and using the same supply chain?
The jobs aren't going away, they're moving.
Inefficient manufacturers are loosing market share to efficient manufacturers.
The jobs that will go away are jobs that were artificially strung out by contracts that were, as we are now seeing in graphic form, not good for the employees, the company, _the union_, or for that matter the COUNTRY.
This is long overdue. You can only do stupid boneheaded things and fall off the back of the truck in rush hour traffic so many times, eventually you will get run over.
The "Big Three" had warning in 73, 82, 94, and 2002...
This is of their own doing. Let them fail, and those that go with them. They need to find something else that is efficiently productive to do for hte ocmpany instead of being artificially supported through bloated and inefficient buraucracy...
Like the government they are now crying to for a hand out.
The _best thing_ that could happen to any of these bloated juggernauts is they go into bankruptcy and receivership.
That means someone who is _fiscally responsible_ is put in charge and given free reign by the court to settle it's reorganization and operations. If it can't be saved, it's sold off, bit by bit. If it can be saved, the receiver makes the deals to keep it running: waking up the Union and their unrealistic salary demand, the management pay structure, benefits that are far outside the reward for the value of the worker and what they provide for the company.
Yes, bankruptcy is the best thing that can happen to them. It's not the end of the world. I got sick this last year of 'oh god the world will end scare-tactics. I'm not about to listen to overpaid suits scream for golden parachutes and more of my tax dollars to bail out what they did themselves into.
Let em fail. I hear China is in the market for a brand name. Or two.
Actually, they won't "fail", they will declare chapter 11 bankruptcy and then be able to reorganize under a bankruptcy trustee. Look at how many times the airlines have gone Chapter 11. I think a complete reorganization of GM under outside supervision is long overdue.
John, more than one analyst has stated that GM cannot function under bankruptcy .
This article is three years old but addresses your airline argument.
Bankruptcy? More like Extinction
By KEVIN A. WILSON
Wall Street is getting one thing wrong on the domestic auto industry: Bankruptcy is not a good option because unlike a retailer or an airline, emerging from the other side in slimmed-down, mean, fighting trim is unlikely.
Bankruptcy for Detroit’s embattled automakers is more likely to mean extinction than reorganizaiton. Here’s why: Would you buy a car from a bankrupt automaker? Most Americans wouldn’t—especially those Americans who buy mass market cars. In fact, more people said they’d be willing to buy a Chinese-built car from an as-yet unknown maker (28 percent) than buy one from a bankrupt automaker (26 percent) they already know. This according to an independent survey released just before the holiday break:
Interestingly, people who earn more money and buy more expensive cars tend to be more willing to risk buying from a bankrupt maker. At least they say so when they’re taking a survey. We don’t have much evidence in the marketplace, because the most recent bankruptcies involved Daewoo and Kia, firms that didn’t cater to the wealthy.
Most media reports you read on this survey (including the one you’ll find if you follow the preceding link) spin the story as “more bad news for GM” when, in fact, the survey simply confirms what CEO Rick Wagoner has been telling us for months: GM management does not see bankruptcy as a viable option. It’s the Wall Street types who keep shouting that word, not the people running the car companies.
Maybe the analysts have just spent too much time dealing with highly leveraged venture capital firms or something, but the ones who advocate bankruptcy as an “out” for GM or Ford – a means of shedding pension obligations and stripping down to basics, are missing this key point. It won’t work because consumers don’t regard a bankrupt car company as the equivalent of a bankrupt retailer or airline—you go into K-mart, you buy whatever it is you need, and you take it home. You get on a plane, go on a trip, and it’s all over. Buy a new car, though, and you’re into it for four or five years of payments, warranty coverage, recalls and routine maintenance. We’re talking a long-term relationship here, and people aren’t going to sign up for that if they don’t know that the company is going to live. Already, the chatter about bankruptcy has consumers worried—understanding the consumer mind, however, is not a Wall Street strength.
Reorganization and stripping down to fighting trim are necessary measures, but somehow Detroit needs to find a way to do it without going bankrupt. A declaration of bankruptcy may be the “easy out” to get rid of pension obligations for some companies, but for Ford or GM, the declaration would be a death knell.
Yes, their losses this year have been impressive. But we are talking about some of the biggest manufacturing companies on the planet. GM will lose about $5 billion for 2005. But that’s only a quarter of what it would have to lose to qualify as “bankrupt” if it were an ordinary consumer like you or me. It has plenty of assets, in other words, to continue fighting. There are lots of opinions out there about what the odds are on success in that fight, and precedents on both sides to show that turnarounds on a slippery slope are unlikely (think Studebaker or AMC) but possible (think Nissan ).
It will take the unions and companies sitting down at the table in the coming year and recognizing that neither side can “win” because their fates are so inextricably linked. That would take extraordinary acts of courageous leadership on both sides of the table, but given the reality of what bankruptcy means it’s their only hope. The trick will be to force the recognition of their shared desperate straits, and perhaps the threat of bankruptcy is useful in that regard. But that’s the only value I see in it.
The reflex on Wall Street is to say that you reorganize only under bankruptcy, which protects you from creditors. The biggest “creditors” that auto companies seem to worry about aloud, however, are their Wall Street shareholders and the analysts who supposedly represent these shareholders’ interests. Institutional investors, especially, hold a lot of sway at domestic automakers.
My understanding was that investors put up cash to finance an enterprise in hopes of making a better return than they’d get banking the money and earning interest. The reason the return is better is that they’re taking a bigger risk. And yet, all I’ve heard from Detroit execs for two decades now is about how they’re running their companies to “protect shareholder values” and to make sure they pay dividends, while everyone else seems to be asked to take risks. Other obligations—to make the investment it takes to make quality products for consumers, or to the people who do the work for the companies—seemed secondary to this “shareholder value” perspective on the business. Management, often paid in stock options, was co-opted into a business model that put the quarterly dividend ahead of the company’s long-term interest. This is overstated and only one element of what went wrong, of course, but it was a factor that is rarely recognized. If the analysts and shareholders manage to force GM or Ford into bankruptcy, they could find themselves on the true downside of risk at last, and it won’t be just a missing dividend check. Force bankruptcy and the buyers will probably flee, depriving the company of the cash flow it will need to emerge in better shape. Most shareholders would be left with worthless paper, though clever traders on Wall Street may get cash to stick to their hands in ensuing collapse. The word we use for that kind of investor isn’t kind: “vulture.”
I figured I carry over my take from the other thread that inspired this one.
The failure of the Big 3 is directly attributable to the insanely quick rise in gas prices that decimated their large vehicle sales which was the one corner of the market that they still dominated.
Then the housing market collapsed along with the credit markets which dragged them down even further and in GM's case ruined their captive finance arm so that even though gas prices have now come down they cannot afford to finance their own products at competitive rates.
Also old percertions die hard and many people still remember the crap quality that GM turned out in the late 80's early 90's and believe that it is the same today.
What's hilarious is that there is not a shittier car made than those by VW and yet they are poised to overtake Toyota due to people's perception of them being reliable. I work for a VW dealer so yes I am well acquainted with their crap...and no I don't work in the new VW sales department.
Another funny thing is that people perceive imports as getting great gas mileage when in fact GM cars get BETTER mileage than many comparable import models.
For example my 240 HP Pontiac Grand Prix GTP sedan gets 31 mpg highway which I have verfied on more than one occasion, but yet many small 4 cylinder VW's can't achieve that kind of mpg on the highway. I even get an average of 25 mpg in everyday driving and yet once again many of the smaller 4's don't get that as well.
Anyway many of you azzclowns in here cheering on the demise of GM and Ford need to get your heads out of your azzes and realize how devasting that would be for the broader economy. Even transplants like Nissan and Toyota have warned that the loss of suppliers from GM's failure would force them out of building cars here in America.
How can they add their supplier info to the jobs lost? Are they saying if our company closes it's doors all of those companies will go under as well. That's like saying if I stop eating @ Chipotle, Baja Fresh, Grocery Stores, etc... are going to go out of buisness.
Got love the nice little statement "$25B now or $156B later" I think I'll stick with the $156B rather then the $156B and my $25B. No one is buying their crap so a bailout is going to do nothing, but prolong the inevitable.
This is like a comments I've heard about the NFL,
"If a coach looses 3 games, especially this year, they are out. Why don't we have the same rules for our industry CEOs as we do in the game of football."
There's more, but this one sticks out.
I'm so sick and tired of hearing bailout here and bailout there. Well with the unemployment rate at what it is (not a big percentage of those people working in the auto industry) I think I'm going to need a bailout soon. Think our government will give me/us $25B.
Let's start a petition.
These bailouts are like family memebers always asking for money. time for our government to show some tuff love.
This is scare tactics. The wolf is at the door! The wolf is at the door!
GM says they can't operate under bankruptcy.
Why is that? Because the receiver would cut the sacred cows that they pay tribute to every day "we are the biggest"
The biggest problem with 'The Big Three' is entrenched corporate culture.
The only way to change it, is to shut em down.
How come it was O.K. for the union to extort (with the willing complicity of the management) exorbitant pay raises for the lineworkers with the cry of "shut em down"
But when it's consumers saying it...out of whatever reason: Apathy, Disgust, Rage...
Why is that wrong?
The automakers did not die out because of a metoric rise in gas prices. This isn't the first time THAT has happened.
If such were the case, the prices are back to where they were four years ago---it should all be good for them now.
The Policymakers and Managers steered their vessels down this shallow river in search of the golden chest of loot somewhere near the headwaters. In search of that greedy goal, they neglected to notice they were heading up a river getting narrower and narrower. And natives were gathering along the ever higher banks of the canyon walls to each side.
As the natives siphoned off market share with efficient models that FOR SOME REASON people bought...the managers and union stayed complicit in the illusion that 'WE make big cars' and big cars mean big profits.
O.K. well, you put all your eggs in one basket. Sorry you tripped and fell.
They steered that ship so far upriver they can't turn it around, and the natives are throwing rocks into the bilge and they are rapidly sinking. So what do they do? Call uncle sugar for a bailout because of terrible stewardship of a company. Corporate governance should be criminalized---then these bozos could be prosecuted and sent to prison for their crimes against the shareholders and against the workers they (at one time) employed.
"Now you got to clean that mess up"
Arbitrage, and Spinoff. Chevrolet becomes it's own brand. So does Corvette.
The company is so big, it's unwieldly. It CAN'T move fast to recover from colossally stupid (and TOTALLY FORESEEABLE) product mix decisions.
Do you really want to SUPPORT that?
I, for one, think breaking up the monolithic behemoth that is GM does not make me an 'azzclown' but someone with an astute insight into what caused the problem with GM: It's simply too big to respond.
Standard Oil was broken up by the government.
Why not GM?
The union said 'shut em down' for years. Now they get what they wished for all those years. And they can see what 80 years of greed got them in the end.
They will HOPE to get the same pay and benefits that their 'scab brothers' who work down south at the Japanese Plants make.
But guess who's sustainable?
Whaddya want: A great paying job for a year, or a decent paying job for five years?
norm(The 12 sec Dual SU Dude) Wrote:
> Also if we get in a large scale war who's gonna be
> there to build the arms like GM did in the 40's???
> It is a valid point.
Ha HA ha!
That point past long ago.
Then again, Nissan Plants, Toyota Plants, Kia Plants, are all over the south.
Why do the arms need to be made in Michigan, Illinios, and Ohio?
They can be made just as well by those facilities. That is a red herring.
Adam Opel A.G. was never bombed in Germany, neither were FORD holdings in the same country (Germany)... Automakers find a way to survive even on the 'hostile' side of a war zone.
If we get into a large scale war, it will be with China. And we will loose.
Get those illusions of victory against that foe out of your head. It's isn't going to happen. No matter what America thinks it can produce, the Chinese will outproduce it, period. They have the manpower, they have the education, and with all the technology transferred in the 90's to china they have taken (to coin a phrase) "A Great Leap Forward" putting them decades ahead in development of those industries to carry on full scale war material production of MODERN arms.
That bridge was crossed 10+ years ago with Billy Bob and his 'let's all get along' diplomacy (and campaign contribution payback scheme)---anybody up for nuke secrets for sale? Bargian basement prices! I did not sell nuke secrets to that nation, Red China. (sound familiar?)
John Coffee is right: put them in receivership, let someone who is not mired in corporate sacred cows CUT THE FAT and put things right with those who have come to dine at the altar of greed, corruption, and blindered stewardship. Hey, let's not even TRY to build a small car. We do so well with the big ones, nothing will EVER change that!
norm(The 12 sec Dual SU Dude) Wrote:
> Hosahn, you totally looked over the point I made
> above about the now lower gas prices and the
> current credit markets and the effect it had on
> GMAC's ability to loan money at competitive
> Also there have been a number of articles written
> that state GM wouldn't even be able to secure
> funds to operate under bankruptcy and would simply
> shut down all together.
You're right, and you obviously ove3rlooked the fact that the company has been steered blindered up a river to a point where they can't turn back.
Shutting them down is the only option.
Let me put it to you another way:
Is it GOOD for the country to have ONE company so big and powerful that if they go out of business they can totally drag the whole COUNTRY down with them?
I don't think it is.
I think it needs to fail. The companies that spin off after receivership and liquidation will be smaller, more competitive, and more able to respond to consumer demands and marketplace requirements.
GM was too big for it's own good for FAR too long. If they 'fail' so be it.
It think it's going to be good for the country, and good for the company in the long run.
That I can't cry any tears for a company that dug itself in so deep on B.S. financial trickery is jsut my way of saying "when you aren't adding value to something, then the money you obtain from that is fraud"
Sorry if frauds getting burned doesn't upset me. GM was defrauding the country, building numbers on lie after lie. And when a little bump comes and upsets the table they were building their house of cards upon...it all came tumbling down.
It does not scare me that GM may go out of business. There are PLENTY of OTHER places for me to buy a car from, having one less mediochre middle of the pack offering doesn't upset me all that much. Sorry!
Norm, I am curious...what is your reccommended course of action? (no internet links, please).
Every time there is a bailout, some fatcat buys his teenage daughter a Bentley, and gives himself a $500mil raise. The reasoning behind all of this sounds about as logical as someone saying that the reason why he keeps molesting children is so he wont die. Let him die.
"Oh, but he has a wife and kids and he's the sole supporter."
"They will starve."
I really dont care if they do, because I dont think anything justifies the raping of children, but for humanity's sake, lets me hear what you think should be done to save this man's family, but yet prevent any more episodes of molestation.
Sort of the fool me once shame on you fool me twice shame on me deal.
And yes I do feel that a company that is badly ran should go down in a ball of flames and if they take other companies and people with them so be it.
Right now I work for one of the largest engineering firms in the world. They have been laying people off for the last 1.5 years because of the economy. I don't see anyone coming to our rescue. I don't cry about it either. When/If the day comes I am laid off, I will so ok and go look for something else. If that means flipping burgers at 3-5 different places or doing a job nobody wants to do so be it.
"I believe that no one is above a good ass kicking"
-Don't remember who said this, but I believe in it and it's a bout time GM, Ford, and Chrysler get one.
**** take the dealers with em, I've sat next to to many people getting taken by these jerks as well.
I didn't support Obama nor did I support McCain. My candidate would have cut this crap off at the elbow once in office, but he wasn't nominated because of crappy resitrictions (Ron Paul in 2012 on a respirator will work for me) Total overhaul of everything.
Is National Pride Worth Bankrupting Americas Future?
What happened to all the money made during the good times?
Car and truck sales profits?
Gee, diversity hasn't helped them, maybe their business model is corrupt.
Sucks if you spend it all and live large as if it's going to keep on rolling in forever. Or the union will pay you good for work, strike, retirement.
Retool for the future? Just hire better lobbyists to prevent any disruption of the current status. Maybe those lobbyist dollars would have been better spent to eliminate the health care costs and transfer them to a national health status?
Unions like the government 'protecting' them. Or change the American culture toward ecology and efficiency? Nope, not as profitable short term and these folks think in 90 day intervals. A year is a long time. 5 year and 10 year plans, don't make me laugh.
Funny how the newer 'transplant' auto assembly sites primarily in the south seem to work out. Of course there isn't the union influence like the rust belt.
I personally have witnessed this 'culture' for a very long time being in the car biz.
It has not changed.
Too big to fail was the call for saving AIG, Goldman Sachs et al., where will it end?
Saving the world is great but sooner or later there will be a price has has to be paid.
Maybe another rebate check to 'stimulate' the economy?
One of the companies I am associated with supplies to GM.
They have taken a hit since June.
They will survive without GM's business albeit at a lower profit level.
The management is conservative. (privately held company)
They know their limitations and do not get swayed by the siren song of living large in the moment.
Kind of an old approach to business but nobody is asking for handouts for bad judgement.
This is nothing but corporate welfare. Every time this comes up its "bail us out or we'll take our jobs & biuld plants in some other country."
What needs to happen.
1) Restructure but not under Chapter 11 as their creditors get ****** not GM.
2) Cut the fat by cutting executive wages & perks & either roll back union wages or bust them altogether.
3) The government should be a little more protectionist. Anything sold in the market must be a least 75% produced in the market. If not heavy import fees. Every large market country should be doing this as are most already i.e. China, Japan. If that fucking tight ass Chinese shite of country can do it & not open their market up to the rest of the world so be it. Fuckk you China & your lead paint children's toys & malamine milk products.
4) If you want a bailout then the government just bought a controlling share of the company. Take the money & shut the fucckk up.