gm filing for bankruptcy

[exalted512]

http://money.cnn.com/2009/05/31/news/companies/gm_bankruptcy_looms/index.htm

tomorrow at 8 am
-Cody

[dane_peterson]

And then it comes down to us consumers to bail the government out... by buying GM vehicles. How ironic...

[BlueFox]

And then it comes down to us consumers to bail the government out... by buying GM vehicles. How ironic...

Don't forget the old saying, "What's good for GM is good for the USA."

[obieone]

I got a form letter from those a**holes over the weekend. And they were actually citing their biggest vehicles, as examples of why their brand is so great. With this admin., the LAST thing I'm doing is buying a gas guzzler!!! I'll end up paying for 3 times.
1. Buying a vehicle that I DON'T need- I've already got 2 of their products in my driveway
2. Buying more gas than I need
3. Paying some STUPID 'green' tax, that I KNOW is coming!

This reminds me of those panhandlers in San Diego- "Well, what did you do with LAST $9 billion I gave you? Bought booze with it, didn't you!!!"

[mantis]

I firmly believe that if over the last 25 years the American car companies would have made a better product, this would not be happening.

Dan

[oifvet0608]

The government now owns yet another large American corporation. Does anyone else see where this is headed...

Before anyone questions my patriotism or my words I'm in Iraq right now, riding in a GM vehicle...but I own a FORD, HAHAHAHAHAHAHAHA!!!

[obieone]

The government now owns yet another large American corporation. Does anyone else see where this is headed...

Before anyone questions my patriotism or my words I'm in Iraq right now, riding in a GM vehicle...but I own a FORD, HAHAHAHAHAHAHAHA!!!

KEEP posting bro. It let's us know your safe.:)

[ken brydson]

Just saw a new Camaro today in person. Man it looked nice. Might bring me back to the Bowtie.......

[Jstas]

Just saw a new Camaro today in person. Man it looked nice. Might bring me back to the Bowtie.......

Kinda like this one?

http://cache.gawker.com/assets/images/jalopnik/2009/06/Camaro_crime.jpg

Yes, the wheels were actually stolen and the jack was from a Range Rover.

[sucks2beme]

Kinda like this one?

http://cache.gawker.com/assets/images/jalopnik/2009/06/Camaro_crime.jpg

Yes, the wheels were actually stolen and the jack was from a Range Rover.

Damn Mustang guys!:eek:

That's just wrong.
The new Camaro is about the only new car that excites me.
I really loved my 1969. The state police loved that car too.
They pulled me over to do a "safety inspection" about twice a month.
Measure the rear bumper height, check the exhaust, tire depth.
It didn't give me a warm a fuzzy for the fuzz, that's for sure.

[dane_peterson]

I firmly believe that if over the last 25 years the American car companies would have made a better product, this would not be happening.

Dan

Agreed. There's no turning back now though... it would take GM many MANY years to regain the reputation as a quality manufacturer. The investment isn't worth it.

[markmarc]

A couple of thoughts:

I find it so ironic that so many in here bitch as manufacturing jobs leave our country, yet don't like the fact that the gov't is trying to save manufacturing jobs, which is key to a healthy economy.

What would be the cost of having to rebuild the economy of those areas if GM and Chrysler disappeared? I guarantee far, far more than the $60 billion the bankruptcies will cost, and the results won't be as good.

During WWII, the gov't basically ran the big three, telling them what to build, how many to build, and when it was needed. Whether you like it or not this is economic warfare, and we would be wise to recognize that the reason Japan, Germany, and Korea has auto factories in the USA is that it is economically viable. Once out of bankruptcy, GM and Chrysler will be on the same footing as the foreign competition.

History shows that countries that have a manufacturing base grow, while those that don't stagnate. Remember, we are spending 1/20th on these two corporations compared to getting Saddam. All the while employing both directly, and indirectly 300,000 AMERICANS (that doesn't include the small businesses that are open because of those factory workers). Seems like a far better usage of my tax dollars both short and long term.

[sucks2beme]

I'd like to buy quality goods made in the USA. Where does one find them?
Until someone comes along and puts their foot down, it won't change.
They don't even want to use U.S. truck drivers to haul stuff up from Mexico.
They sent a lot of my company's jobs to India. And they aren't doing a good
job, but boy don't they work cheap. I don't know how to fix it. But unless
someone with a real set of gonads show up in charge soon, it's going to get a lot worse.

[shack]

I was never in favor of the Govt bailing out GM. They could have filed for Bankruptcy without the help of the US Govt, the Canadian Govt and UAW. They could have restructured like many in the past have done...and come out leaner...and profitable. They could have sold parts of the company as going concerns...either of which would have been better IMO. I know arms of the US Govt can accomplish great technical feats (NASA, the US military, CDC, etc...)...but I don't trust them to do it economically or profitably.

And the last thing that gives me absolutely NO CONFIDENCE they can pull this off....

http://finance.yahoo.com/family-home/article/107136/The-31-Year-Old-in-Charge-of-Dismantling-G.M.?mod=family-autos

I'm all for new ideas and the enthusiasm of youth...but this is one of the dumbest moves I have ever seen. I am a firm believer that one must have at least a fundamental working knowledge of something to fix it. Theory is fine…but first hand experience is more important than intellect and the knowledge of macro/microeconomics (although all are necessary to do the job).

GM would have had a much better chance of success as a Fiat subsidiary.

I hope I am wrong. Only time will tell.

[bobman1235]

A couple of thoughts:

I find it so ironic that so many in here bitch as manufacturing jobs leave our country, yet don't like the fact that the gov't is trying to save manufacturing jobs, which is key to a healthy economy.

Everyone defending the big 3 have to get their arguments straight. Half of you talk about where the company's headquartered and all that matters is whose GDP is being contributed to, the other half argue about manufacturing jobs (which foreign manufacturers have millions of in this country, which makes the argument stupid).

[obieone]

I heard a GREAT question today on the radio. It came from a Ford employee.
"Even though we took no bailout $$$, and are viable, we CAN'T compete with the government. Where does that leave us?"
It's a legitimate beef, IMO.
If Chrysler & GM are going to be stripping their operations, and basically selling their current inventory at COST, then HOW does Ford compete.
Ford business practice, from what I've observed over the years, is to sell a similar product, but for less $.
Does GM have higher legacy costs, because they've always been the biggest of the 3?
It seems like Ford is being punished for doing it right-and I'm no fan of Ford.
Not yet anyway.

[xcapri79]

I heard a GREAT question today on the radio. It came from a Ford employee.
"Even though we took no bailout $$$, and are viable, we CAN'T compete with the government. Where does that leave us?"
It's a legitimate beef, IMO.
If Chrysler & GM are going to be stripping their operations, and basically selling their current inventory at COST, then HOW does Ford compete.
Ford business practice, from what I've observed over the years, is to sell a similar product, but for less $.
Does GM have higher legacy costs, because they've always been the biggest of the 3?
It seems like Ford is being punished for doing it right-and I'm no fan of Ford.
Not yet anyway.

No the government wants Ford too. American capitalism is gone with a whimper because of the "sheeple" of this country.

It is very sad that the Russians have to tell us this because this is the change we got.
http://english.pravda.ru/opinion/columnists/107459-0/

[wingnut4772]

No the government wants Ford too. American capitalism is gone with a whimper because of the "sheeple" of this country.

It is very sad that the Russians have to tell us this because this is the change we got.


Amen! I can't believe what is happening to this country

[xcapri79]

Amen! I can't believe what is happening to this country

It is easier to understand when you have our fourth estate turning into the fifth column.
The mainstream media have not been our watchdog, they've been the Chosen One's lapdog.

[markmarc]

Everyone defending the big 3 have to get their arguments straight. Half of you talk about where the company's headquartered and all that matters is whose GDP is being contributed to, the other half argue about manufacturing jobs (which foreign manufacturers have millions of in this country, which makes the argument stupid).

Bobman:
You need to look at the big picture of what is going to drain your tax dollars more, a $60 billion bailout? Or, a couple of hundred billion to support a huge area of tremendous unemployment?

Yes, foreign manufacturers have tremendous amount of jobs, but not as many as American companies. Second, American companies keep a far greater portion of their profits here in the USA. If you look at the history of US manufacturing you'll see a direct connection between the rise of trade deficits and the loss of domestic manufacturing (yes, oil is a large chunk).

Then, consider the potential of future large scale wars. We need large manufacturing that can quickly be converted to defense needs. Look at Britain during WWII, their manufacturing industry had already been marginalized. Guess who had to supply them?

Nobody wanted this to happen, but it's where we are at. We've poured $150 billion into AIG, all because we were foolish enough to forget the lessons of the economic panic of about 1910 and re-legalize a form of dubious trading. Greenspan was convinced Wall Street would police itself. That worked out really well :>(

As for Ford, they are reaping the rewards of buyers that refuse to look at GM or Chrysler. If they were smart, they'd be advertising like crazy that ""Free of taxpayer support". truthfully, at some point I believe they'll get at least some grand tax break for staying out of the gov't coffers. Plus, they'll get the UAW to make things even with the other two.

[ben62670]

Ford

[xcapri79]

Ford

Does this mean that Mustang finally beats Camaro?
At least Government Motors can keep their logo.

[PhantomOG]

Bobman:
You need to look at the big picture of what is going to drain your tax dollars more, a $60 billion bailout? Or, a couple of hundred billion to support a huge area of tremendous unemployment?

That's your opinion, not a fact. The auto manufacturers could have and should have gone through bankruptcy on their own and restructured on their own.

Capitalist companies make decisions on profits and the bottom line. If they can't make a profit they go out of business as they should. This is the beginning of the great socialist experiment of our time and it disgusts me to the core.

Why can't people see that if you don't allow people to fail, no one can succeed?

Everyone is talking like if the government had allowed the auto industry to file bankruptcy on their own all the manufacturing plants would have just up and disappeared. That's not the case. The dipshits running those plants would lose their jobs and smarter people who know how to run a business would buy up the worthwhile investments and still provide jobs.

[AsSiMiLaTeD]

That's your opinion, not a fact. The auto manufacturers could have and should have gone through bankruptcy on their own and restructured on their own.

Capitalist companies make decisions on profits and the bottom line. If they can't make a profit they go out of business as they should. This is the beginning of the great socialist experiment of our time and it disgusts me to the core.

Why can't people see that if you don't allow people to fail, no one can succeed?

Everyone is talking like if the government had allowed the auto industry to file bankruptcy on their own all the manufacturing plants would have just up and disappeared. That's not the case. The dipshits running those plants would lose their jobs and smarter people who know how to run a business would buy up the worthwhile investments and still provide jobs.

Agreed

[markmarc]

Phantom:
Right now without the gov't there is no private entity available for financing the bankruptcy, period. It would have been Chapter 7 time, instead of 11. Plus, the gov't would have been on the hook based upon the pension insurance plan. That would have costed more than the total investment now.

I've got news for you, pure capitalism when it comes to big corporations died decades ago. They've been getting special tax breaks and laws since WWII. Look at the military-industrial complex, communications industry, etc. etc..

By all accounts these companies have failed, but bankruptcy allows whether public or privately assisted, the opportunity for a rebirth. That is good, or at least better than the alternative.

[shack]

The auto manufacturers could have and should have gone through bankruptcy on their own and restructured on their own.

My thoughts...as stated earlier

Everyone is talking like if the government had allowed the auto industry to file bankruptcy on their own all the manufacturing plants would have just up and disappeared. That's not the case.

A great example is what is going on now. There appears to be a non-automotive investment group that is very interested in buying the Hummer brand as a going concern. There is also really good interest in Opel and Saab in Europe. IMO GM could have sold these brands on their own. I might actually keep the partnership with Daewoo just for the ability to quickly bring small fuel efficient cars to the US market. Kill Saturn (or sell it), keeping one or two of the of non-Opel vehicles like the Sky (especially since the Pontiac Solstice is gone as well) and rebranding them as Chevys. Merge Buick into either Cadillac or Chevy. Get rid of either GMC or Chevy Trucks by merging one into the other. Shut down the most inefficient factories and move to the newer ones (if that means moving from places like Detroit to the new Saturn facilities...so be it). Narrow the product line (especially in the truck and SUV line-up) to 3 Caddys, 2 Buicks, 4 or 5 Chevys and 2 Corvettes (make the Sky a baby Corvette - it worked for Porsche with the Boxster) and I would even limit the trucks and SUVs to one brand (maybe excepting the Escalade - because we want the pro athletes to still have something to drive besides Bentleys). Deal with the Unions and creditors under chapter 11. IMO, GM could have done something similar to this WITHOUT the help of any govt or Union. In 6-18 months they could have emerged as a lean company without all the baggage of the past. Some jobs would be lost, but maybe...just maybe...those jobs could be regained as the company prospers.

As I said...I have NO confidence in the ability of a govt to run a company.

[Hawkeye]

I've been against all the bailouts. But since our elected leaders have chosen to disregard the will of the people, the least they could have done is close the plants in foreign countries. I have a difficult time swallowing a bailout and the cars will be made in China and brought here to sell to all the unemployed people.

That Pravda article hits the nail squarely on the head. Good god, where are we going?

Gordon

[F1nut]

Good god, where are we going?


To Hell, led by Satan himself. Welcome to change we can believe in. :rolleyes:

[Danny Tse]

I've got news for you, pure capitalism when it comes to big corporations died decades ago. They've been getting special tax breaks and laws since WWII. Look at the military-industrial complex, communications industry, etc. etc..

I hope the Feds really, I mean REALLY, look at the books of these auto companies and get those pork out. The car industry, if you look at it on a worldwide basis, is still ultra-competitive, with many markets (think China) waiting to be conquered. US auto manufacturers need to be lean and clean, and with a world view, to compete with competitors such as Toyota, Honda, Hyundai (I believe it's the 4th biggest automaker in the world now), etc.

For the last 13 months or so, I was involved in a couple of rate cases that provide subsidies to certain Californian telecommunications companies. The State "guarantee" these companies a very good yearly rate of return (certainly better than what you and I can get on our investments) for the next several years. Pretty good deal if you can get it. We had to disallow some of what these companies' claimed as expenses because they were just pure pork. We even studied the compensation/benefits arrangements of the auto industry as comparison to what these telecom companies were paying to their employees. It was certainly an eye opener.

[PhantomOG]

I can think of no other entity better suited to cut out pork than the US government... :rolleyes:

[Danny Tse]

I can think of no other entity better suited to cut out pork than the US government... :rolleyes:

State governments as well. Being someone coming from the private sector, government finances is like "fuzzy logic" and "new math" rolled into one. Unfortunately, they're not run like private companies, they face no competition, and there's an income stream no matter what happens....which breeds certain attitudes into some government employees. Believe me, the fiscal year is coming to an end here in the CA State government, and we have been told to blow out the funds that we haven't used. I don't think any private companies, nor your own household finances, are run like that.

[Danny Tse]

Latest news is that Hummer will be sold to a Chinese company. I wonder if this is the Chinese company that Honda was suing for pirating the design of its CR-V.

DETROIT – General Motors Corp. took a key step toward its downsizing on Tuesday, striking a tentative deal to sell its Hummer brand, while also revealing that it has potential buyers for its Saturn and Saab brands.

GM has a tenatative agreement to sell its rugged Hummer brand to Sichuan Tengzhong Heavy Industrial Machinery Co. of China, said a person briefed on the deal.
The Detroit automaker announced Tuesday morning that it had a memorandum of understanding to sell the brand of rugged SUVs, but the buyer's identity was not released. A formal announcement of the buyer was to be made Tuesday afternoon.
Sichuan Tengzhong deals in road construction, pplastics, resins and other industrial products, but Hummer would be its first step into the automotive business, said the person briefed on the deal. The person spoke on condition of anonymity because the details have not been made public.

GM said the sale will likely save more than 3,000 U.S. jobs in manufacturing, engineering and at various Hummer dealerships.

As part of the proposed transaction, GM said, Hummer will continue to contract vehicle manufacturing and business services from GM during a transitional period. For example, GM's Shreveport, La., assembly plant would continue to contract to assemble the H3 and H3T through at least 2010.

The automaker also said Tuesday that it has 16 buyers interested in purchasing its Saturn brand, while three parties are interested in the Swedish Saab brand.
Chief Financial Officer Ray Young told reporters and industry analysts on a conference call that GM is continuing to pursue manufacturing agreements with a new Saturn buyer.
GM would like to sell the money-losing Saturn brand's dealership network, contracting with the new buyer to make some of its cars while the buyer gets other vehicles from different manufacturers.

At the same time, bridge loan discussions with the Swedish government are progressing, Young said.

GM, which filed for Chapter 11 bankruptcy protection in New York on Monday, is racing to remake itself as a smaller, leaner automaker. It is hoping to follow the lead of fellow U.S. automaker Chrysler LLC by transforming its most profitable assets into a new company in just 30 days and emerging from bankruptcy protection soon after.

But GM is much larger and complex than its Auburn Hills-based rival and isn't up against Chrysler's tight June 15 deadline to close its deal with Fiat.

Sharon Lindstrom, managing director at business consulting firm Protiviti, said the companies pose different challenges. But as with Chrysler, she notes that the Treasury Department made sure many of GM's moving parts were in order ahead of time so a quick bankruptcy reorganization might be possible.

"They had a lot of their ducks in a row because the terms of the government financing forced them to get all the parties to the table in a very, very short period of time," Lindstrom said.

In addition to its plan to sell the Hummer, Saab and Saturn brands, GM will also phase out its Pontiac brand, concentrating on its Chevrolet, Cadillac, Buick and GMC nameplates.
Separately, the German government said Tuesday it paid out the first euro300 million ($425 million) in bridge loans to GM's Adam Opel GmbH division. The loans are part of a deal to shrink GM's stake in Opel and shield it from GM's bankruptcy protection filing in the U.S.

Over the weekend, the German government agreed to lend Opel $2.1 billion. The loans are part of a deal in which Canadian auto supplier Magna International Inc. and Russian-owned Sberbank will acquire 55 percent of the company.

A sale of the Hummer brand had been expected. Chief Executive Fritz Henderson had said in April that the automaker was expecting final bids from three potential buyers within the month.

Critics had seized on the rugged but fuel-inefficient Hummer as a symbol of excess as GM's financial troubles grew and gas prices rose. Sales at Hummer, which is known for models like the H3 with military-vehicle roots, have been in a steep slide since gasoline prices rose to record heights last summer. For the first four months of this year, Hummer sales are down 67 percent.

GM nailed down deals with its union and a majority of its bondholders and arranged to sell off most of its Opel operations in Europe in order to appear in court Monday with a near-complete plan to quickly emerge with a chance to become profitable.

The government has said it expects GM to come out of bankruptcy protection within 60 to 90 days. By comparison, the judge overseeing Chrysler's case approved the sale of its assets to a group led by Italy's Fiat Group SpA in just over a month. Some industry observers think Chrysler could emerge as early as this week.

During Monday's hearing, GM attorney Harvey Miller stressed the magnitude of the case and the importance of moving GM through court oversight as fast as possible. He noted that the automaker only has about $2 billion in cash left.

"If there's going to be a recovery of value, it's absolutely crucial that a sale take place as soon as possible," Miller said in his opening statement.

The automaker wants to sell the bulk of its assets to a new company in which the U.S. government will take a 60 percent ownership stake. The Canadian government would take 12.5 percent of the "New GM," with the United Auto Workers union getting 17.5 percent and unsecured bondholders receiving 10 percent. Existing shareholders are expected to be wiped out.

Attorneys for GM stakeholders packed the stuffy courtroom well ahead of the automaker's first-day Chapter 11 hearing. U.S. Judge Robert Gerber moved swiftly through the agenda's more than 25 mostly procedural motions.

Gerber set GM's sale hearing for June 30, putting it on a path similar to that of Chrysler. Objections are due on June 19, with any competing bids required to be submitted by June 22.

Gerber also gave GM immediate access to $15 billion in government financing to get it through the next few weeks, and interim approval for use of a total $33.3 billion in financing, with final approval slated to be ruled on June 25. The funds are contingent on GM's sale being approved by July 10. Gerber also approved motions allowing the company to pay certain prebankruptcy wages, along with supplier and shipping costs.

The sheer size of GM makes it a more complicated case than Chrysler.

GM made twice as many vehicles as Chrysler's 1.5 million last year and employs 235,000 people compared with Chrysler's 54,000. GM also has plants and operations in many more countries, meaning it will likely have to strike separate deals to navigate the bankruptcy laws of those places.

Henderson said GM has learned a few things by watching Chrysler's case.
"Certainly the court showed that it can address 363 (sale) transactions in an expeditious fashion," Henderson said at a news conference Monday. "Particularly in our case with what will be a very large 363 transaction."

GM's filing for Chapter 11 bankruptcy protection is the largest ever for an industrial company. GM, which said it has $172.81 billion in debt and $82.29 billion in assets, had received about $20 billion in low-interest loans before entering bankruptcy protection.

[jcaut]

A great example is what is going on now. There appears to be a non-automotive investment group that is very interested in buying the Hummer brand as a going concern. There is also really good interest in Opel and Saab in Europe. IMO GM could have sold these brands on their own. I might actually keep the partnership with Daewoo just for the ability to quickly bring small fuel efficient cars to the US market. Kill Saturn (or sell it), keeping one or two of the of non-Opel vehicles like the Sky (especially since the Pontiac Solstice is gone as well) and rebranding them as Chevys. Merge Buick into either Cadillac or Chevy. Get rid of either GMC or Chevy Trucks by merging one into the other. Shut down the most inefficient factories and move to the newer ones (if that means moving from places like Detroit to the new Saturn facilities...so be it). Narrow the product line (especially in the truck and SUV line-up) to 3 Caddys, 2 Buicks, 4 or 5 Chevys and 2 Corvettes (make the Sky a baby Corvette - it worked for Porsche with the Boxster) and I would even limit the trucks and SUVs to one brand (maybe excepting the Escalade - because we want the pro athletes to still have something to drive besides Bentleys). Deal with the Unions and creditors under chapter 11. IMO, GM could have done something similar to this WITHOUT the help of any govt or Union. In 6-18 months they could have emerged as a lean company without all the baggage of the past. Some jobs would be lost, but maybe...just maybe...those jobs could be regained as the company prospers.

As I said...I have NO confidence in the ability of a govt to run a company.

Shack is right on the money, IMO. At least the the company would have had the chance to emerge and propsper. This way I think they basically have no chance. I'd also be concerned that the situation with GM (and Chrysler to a lesser extent)- just the huge govt. involvement in the auto sector, combined with the increased costs we'll face from the "green" initiatives- may drag down Ford as well. Though they've been getting by, mostly due to smarter asset management, they're not well poised for what I think the future is going to bring for the domestic auto industry.

My 11-yo son (a car fanatic- Don't know where he got that) drew a picture the other day of the "car of the future". It looked like the little smart cars, except with double-humps. He called it the "Obamblama Camel". He said it produces no pollution, uses no fuel and only moves downhill. Everyone will be required to buy one.

[shack]

He said it produces no pollution, uses no fuel and only moves downhill. Everyone will be required to buy one.


Those already exist...

http://upload.wikimedia.org/wikipedia/commons/3/37/Soap_Box_Derby_Racer.jpg


Of course if you want to go UPHILL...there is always....


http://www.pedalcarsandretro.com/store/files/images/large/d_879.jpg

[NJPOLKER]

My thoughts...as stated earlier



A great example is what is going on now. There appears to be a non-automotive investment group that is very interested in buying the Hummer brand as a going concern. There is also really good interest in Opel and Saab in Europe. IMO GM could have sold these brands on their own. I might actually keep the partnership with Daewoo just for the ability to quickly bring small fuel efficient cars to the US market. Kill Saturn (or sell it), keeping one or two of the of non-Opel vehicles like the Sky (especially since the Pontiac Solstice is gone as well) and rebranding them as Chevys. Merge Buick into either Cadillac or Chevy. Get rid of either GMC or Chevy Trucks by merging one into the other. Shut down the most inefficient factories and move to the newer ones (if that means moving from places like Detroit to the new Saturn facilities...so be it). Narrow the product line (especially in the truck and SUV line-up) to 3 Caddys, 2 Buicks, 4 or 5 Chevys and 2 Corvettes (make the Sky a baby Corvette - it worked for Porsche with the Boxster) and I would even limit the trucks and SUVs to one brand (maybe excepting the Escalade - because we want the pro athletes to still have something to drive besides Bentleys). Deal with the Unions and creditors under chapter 11. IMO, GM could have done something similar to this WITHOUT the help of any govt or Union. In 6-18 months they could have emerged as a lean company without all the baggage of the past. Some jobs would be lost, but maybe...just maybe...those jobs could be regained as the company prospers.

As I said...I have NO confidence in the ability of a govt to run a company.

Run a company??? How about health care?????????? Wake up America!!!!!!!

[madmax]

The government is not as efficient as the private sector. Even so, I bet they run GM in the ground even faster than it was moving before.

[wizzy]

Without the gov't GM would most likely be a bankruptcy resulting in liquidation ... not a reorganization.

Reorg is one thing, but liquidation another. If the gov't hands in it saves the company and makes it so reorg and exit is possible, this is a Good Thing for our national security.

[tonyb]

Without the gov't GM would most likely be a bankruptcy resulting in liquidation ... not a reorganization.

Reorg is one thing, but liquidation another. If the gov't hands in it saves the company and makes it so reorg and exit is possible, this is a Good Thing for our national security.

How does national security have anything to do with bail outs of auto makers?
And how does this play out with GM's competition being at a disadvantage now with GM haveing the deep pockets of the USA behind it?

[wizzy]

And how does this play out with GM's competition being at a disadvantage now with GM haveing the deep pockets of the USA behind it?

Good question.

[Kex]

No the government wants Ford too. American capitalism is gone with a whimper because of the "sheeple" of this country.

It is very sad that the Russians have to tell us this because this is the change we got.
http://english.pravda.ru/opinion/columnists/107459-0/If you need Russian propoganda to defend your theory, you may very well be barking up the wrong tree. They are "known and universally respected" for their "free press", after all ... It even reads like anti-American propoganda, and the author seems to revel in our misfortunes.

[John30_30]

And how does this play out with GM's competition being at a disadvantage now with GM haveing the deep pockets of the USA behind it?

How do you think Japanese electronics, Toyota and Nissan, et. al., got a foothold here in the first place?

Answer: Japanese Gov't. subsidies

[Hillbilly61]

Without the gov't GM would most likely be a bankruptcy resulting in liquidation ... not a reorganization.

Reorg is one thing, but liquidation another. If the gov't hands in it saves the company and makes it so reorg and exit is possible, this is a Good Thing for our national security.

The one thing that bugs the hell out of me concerning all of this is that the money being dumped into GM and Chrysler is no where near the amount that has been dumped into AIG and the banks that were being bailed out. Yet, Chrysler and GM is getting all of the grief ... let them go under sort of thing. The number of jobs, multiplied spending power and retained USA capability put into the automakers far outweighs the banks.

My biggest long term worry concerning the auto makers is a government running a business. Most european countries do not well do this with their nationalized industries.

[Sami]

Believe me, the fiscal year is coming to an end here in the CA State government, and we have been told to blow out the funds that we haven't used. I don't think any private companies, nor your own household finances, are run like that.

Households most likely not, but private companies do that as well. If your team/division/etc has money allocated to them in the budget, they feel obligated to spend it because to them it is not saved money. Use it or lose it. Small private companies are of course a different story but it's the same thing in large companies.

[shack]

The one thing that bugs the hell out of me concerning all of this is that the money being dumped into GM and Chrysler is no where near the amount that has been dumped into AIG and the banks that were being bailed out. Yet, Chrysler and GM is getting all of the grief ... let them go under sort of thing. The number of jobs, multiplied spending power and retained USA capability put into the automakers far outweighs the banks.


You are just flat wrong on this one.

AIG or any single one of the top five or ten big banks failing would cost the government more than they have invested in all of the banks. A failure by one of those would send a tidal shock wave throughout the economy that would make a GM or Chrysler failure look like a ripple in comparison. The problem is the way all the banks and insurance companies interact with each other. If CITI fails, chances are 3 or 4 of the top twenty go with them, not to mention all of the regional and community banks. Banks all have "correspondent relationships" with other banks. They have accounts, investments, loans that are shared (pooled) with many other institutions. Then you would have the FDIC insurance and the Pension Guarantee Corp, and so forth that would have to pony up funds. These are all just the direct problems.

Even bigger is the loss in confidence by the public if a big one fails. The run on the banks would be too much to handle and the system would collapse. I hate the govt has to invest in the banks to keep many of them afloat. Unfortunately it is a necessary evil.

Remember too the TARP funds are not just handouts. They are loans backed by stock warrants, convertible to common stock in 5-10 years if not repaid. The banks are paying the govt 5% for the use of these funds. They are basically a bank at this point, issuing treasury instruments paying 2% and loaning the funds to the banks at 5% for a 3% spread. I wish we as a bank could get those margins on all of our loans. The banks are all wanting to pay the TARP funds back. The TARP program is earning the govt $35 billion a year on its $700 billion investment. Not a bad rate of return in these times.

As far as AIG. Who will pick up the insurance coverage and investments if they fail? The multiples are tremendous based on the number of policy holders and investors. The impact on retirees and pension plans from the loss of uninsured paid up policies and annuities alone would be huge. The loss of P&C coverage could be even bigger.

I have less problems with the govt jumping into the financial sector than a mfg or service industry. After all, they are in the banking and insurance business and have been for years. They set the rules and regs for the banks and really do understand the ramifications of their actions in these industries. The failures and problems of the financial sector in many ways has more to do the the govt getting out of the business (so to speak) by easing the regulations on banks, insurance companies and investment houses.

[Refefer]

There's some serious FUD going on in this thread.

[wingnut4772]

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[madmax]

If GM or any other company can't make it on their own I think they should fail.

[obieone]

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Did you just take a shot at the 'state run media'??:confused::D

[Hillbilly61]

You are just flat wrong on this one.

AIG or any single one of the top five or ten big banks failing would cost the government more than they have invested in all of the banks. A failure by one of those would send a tidal shock wave throughout the economy that would make a GM or Chrysler failure look like a ripple in comparison. The problem is the way all the banks and insurance companies interact with each other. If CITI fails, chances are 3 or 4 of the top twenty go with them, not to mention all of the regional and community banks. Banks all have "correspondent relationships" with other banks. They have accounts, investments, loans that are shared (pooled) with many other institutions. Then you would have the FDIC insurance and the Pension Guarantee Corp, and so forth that would have to pony up funds. These are all just the direct problems.

Even bigger is the loss in confidence by the public if a big one fails. The run on the banks would be too much to handle and the system would collapse. I hate the govt has to invest in the banks to keep many of them afloat. Unfortunately it is a necessary evil.

Remember too the TARP funds are not just handouts. They are loans backed by stock warrants, convertible to common stock in 5-10 years if not repaid. The banks are paying the govt 5% for the use of these funds. They are basically a bank at this point, issuing treasury instruments paying 2% and loaning the funds to the banks at 5% for a 3% spread. I wish we as a bank could get those margins on all of our loans. The banks are all wanting to pay the TARP funds back. The TARP program is earning the govt $35 billion a year on its $700 billion investment. Not a bad rate of return in these times.

As far as AIG. Who will pick up the insurance coverage and investments if they fail? The multiples are tremendous based on the number of policy holders and investors. The impact on retirees and pension plans from the loss of uninsured paid up policies and annuities alone would be huge. The loss of P&C coverage could be even bigger.

I have less problems with the govt jumping into the financial sector than a mfg or service industry. After all, they are in the banking and insurance business and have been for years. They set the rules and regs for the banks and really do understand the ramifications of their actions in these industries. The failures and problems of the financial sector in many ways has more to do the the govt getting out of the business (so to speak) by easing the regulations on banks, insurance companies and investment houses.

So, you are saying that the government should have bailed out the banks (which I inherently agree) 'cause they were individually allowed to get so large that their failure would have caused a depression. Right? The fundamentals of these deals were set up under the Bush administration and they allowed using some of the bail out money to give multi million $ bonuses to the same individuals that put said banks into the position.

The eight years of the Bush administration systematically tearing down the rules and regulations, many of which were in place as a result of the Great Depression, is what lead to those mega bank failures putting the national security at risk if those mega banks or their insurer (AIG) failed. A greater national security issue lay with allowing internal USA heavy manufacturing capability to fail.

For example, Chrysler and its subcontractors arrived at the Abrams tank design - one of the best tanks in the world and the only five star tank that can be mass produced & maintained in numbers. There is a reason why the Chinese is interested in picking up the Hummer line....

Prior to arriving at the Abrams tank design, Chrysler groveled to the US Government for a bailout during the mid 80s and the government got paid back in full - plus eventually got one of the best tank designs ever put into service. Had the government said "No" and the company went under, it is doubtful if America would have gotten such a superior weapon whose design elements are considered to be a national secret.

Edit: To add, I am not pro Bush or pro Obama. Obama simply has not been in charge long enough to cause lasting damage - yet. Unfortunately, Bush & his cronies were.

[shack]

So, you are saying that the government should have bailed out the banks (which I inherently agree) 'cause they were individually allowed to get so large that their failure would have caused a depression. Right? The fundamentals of these deals were set up under the Bush administration and they allowed using some of the bail out money to give multi million $ bonuses to the same individuals that put said banks into the position.

The eight years of the Bush administration systematically tearing down the rules and regulations, many of which were in place as a result of the Great Depression, is what lead to those mega bank failures putting the national security at risk if those mega banks or their insurer (AIG) failed. A greater national security issue lay with allowing internal USA heavy manufacturing capability to fail.

Again wrong. The bank deregulation started long before W ever took office. CITI, Chase, BOA etc were megabanks to big to fail way before his administration. And AIG does not insure banks.

Since they are loans to be repaid...how the money is used should be up to them. Some of the bonuses were justified and contractually unavoidable.

There is nothing in a hummer that the Chinese don't already have.

As to no Abrams...a void is never allowed for very long...something always moves to fill it. If not Chrysler...then some other company.

[exalted512]

There is a reason why the Chinese is interested in picking up the Hummer line....

Youre not really serious are you?
-Cody

[Hillbilly61]

Again wrong. The bank deregulation started long before W ever took office. CITI, Chase, BOA etc were megabanks to big to fail way before his administration. And AIG does not insure banks.

Since they are loans to be repaid...how the money is used should be up to them. Some of the bonuses were justified and contractually unavoidable.

There is nothing in a hummer that the Chinese don't already have.

As to no Abrams...a void is never allowed for very long...something always moves to fill it. If not Chrysler...then some other company.

That's your opinion and you are wrong. The bank "loans" are no less a loan than the U.S. government has taken with the auto makers. Equity share. AIG is an insurance company and was insuring mortgage defaults to the banks ... which got over their head when too many defaults to bad mortages surfaced. That caused the system to collapse as buyers of the mortgage based bonds offered by the banks no longer had any confidence that any such security would not go under.

It takes $500M - $1B to put up a major manufactuing plant. The same for autos or chips. That kind of capital excludes most everyone for any kind of real defense capability, unless the infrastructre is already in place. Toyota?

We are not going to agree on this. Let's move on and get along. I think you and I can agree that the overall situation is FUBAR.

[Hillbilly61]

Youre not really serious are you?
-Cody

They are looking for the distribution network. ;)

[shack]

That's your opinion and you are wrong.

And your qualifications for understanding all of the issues in the financial sector are....?

[sucks2beme]

Regardless, I think I'm gonna take it right in the wallet. All the bailouts are
NOT doing well. They can't print money fast enough to cover all the losses.
I can only hope all this stuff is as toxic to China as it's been to us.
Hummer is dead, as well as a lot of other GM divisions. RIP.

[shack]

Regardless, I think I'm gonna take it right in the wallet. All the bailouts are NOT doing well.

About half the top 19 banks (and many of the smaller ones) that took TARP funds are ready or close to being ready to pay back the loans. They DON"T HAVE THE RIGHT to pay them back unless the govt. allows them to do so before 5 years. (one of the bad things about TARP IMO) The TARP funds did most of what they were designed to for the banks....shore up their capital position...while they are shedding the toxic assets and cleaning up their balance sheets. Of the big banks CITI, BOA, 5th/3rd, and Regions still have some work to do, but they are improving and for the time being they are generating enough profits to cover new loan losses. The Govt will own a piece of AIG for quite some time...at least 5 years. Their biggest issues were the risk swaps and their pension funds. Their core insurance business has continually done quite well.

The problem with financials is that all the big ones wanted to become "one stop shopping" financial institutions. The lines between, lending, investments, insurance, mortgages, investment banking, etc...all became blurred. If AIG had stuck to underwriting insurance they would have done just fine. It was their "financial division" that got them in trouble. The same is true for CITI and BOA that got into investment banking and other areas outside of their core business. It never should have happened.

[Hillbilly61]

And your qualifications for understanding all of the issues in the financial sector are....?

And what are yours, particularly with whether or not GM should be allowed to go out of business? That is what this thread is about. Heavy manufactuing is not banking, but it has been expressed by you that those companies should be allowed to go under, while the banks saved.

[exalted512]

They are looking for the distribution network. ;)

You do know that GM's Hummer did not have anything to do with military vehicles when it was/is being sold correct?

And what are yours, particularly with whether or not GM should be allowed to go out of business? That is what this thread is about. Heavy manufactuing is not banking, but it has been expressed by you that those companies should be allowed to go under, while the banks saved.

Actually, he didnt express that they should be allowed to go under, rather that people should not compare giving money to GM vs AIG as AIG going under when have a far greater impact.
-Cody

[shack]

And what are yours, particularly with whether or not GM should be allowed to go out of business? That is what this thread is about. Heavy manufactuing is not banking, but it has been expressed by you that those companies should be allowed to go under, while the banks saved.

Let’s see. A BS in finance, a graduate degree in banking, a holder of a federal and state securities licenses (no longer active), 30+ years as a banker and financial analyst dealing with private clients, commercial customers and commercial R/E portfolios. Currently I'm a SVP for a publicly traded bank started less than 10 years ago. Previously I was a SVP at two of the banks that were part of the 19 largest banks to go through the recent "Stress Test". I have worked with companies going thorough bankruptcy on several occasions both as a lender to the bankrupt company and as a lender to customers acquiring the assets of bankrupt companies.

If you read what I said in regards to GM and Chrysler, I did not say they should be allowed to fail (although bankruptcy in and of itself is a form of failure)...I said they should be allowed to go through reorganization without the help of the govt. and outlined how that could be accomplished in a way that would streamline the companies to make them profitable IMO. If you lend to commercial clients you learn to analyze a balance sheet, income statement and cash flow to understand how a company operates. While GM is much more complicated than most, the underlying factors are pretty much the same. I also said that experts in the auto industry should be handling the reorganization...not someone who with no automotive mfg experience...and definitely not politicians...as some in congress are wanting to do.

As far as banking...first of all, I did not bring up the topic...I responded to someone else. Furthermore, I would have no problem with some sort of a reorganization for some of the banks without govt help...if that were possible. It isn't. A bank is either solvent or it isn't. There is no chapter 11 for a bank. Banks can't have their liabilities (deposits) discharged, while picking and choosing which assets (loans) they want to keep and holding on to the good stuff as is allowed in a reorganization. Banks (et:al) are unique in that ALL banks, S&Ls and Credit Unions are already insured by either federal or state agencies. They are heavily regulated by the Office of the Comptroller of the Currency, the FDIC, FSLIC, NCUA, State Banking Regulators, the Treasury and to a lesser extent the Federal Reserve Banks. Banks cannot operate without a charter approved by the govt. They cannot open (or close) depository branches or ATMs without govt. approval. They cannot sell themselves or buy other banks without govt. approval. When banks are deemed to be insolvent...they are immediately shut down and all their assets are in control of the regulators and sold or transferred to solvent institutions and the FDIC makes sure all depositors are made whole. The government DOES understand banking because they have been running them for years. The govt. is actually the primary determiner of whether a bank can remain open for business. Banking operates under the auspices of the govt. and therefore govt. really their only source of help when all other sources replenishing capital are gone. BTW there has already been many bank failures this year. In fact more have been shut down through the end of May than were closed in all of 2008...and the list will get much longer. Any one of the top 20 banks failing would wipe out the entire FDIC reserves and could potentially cost the as much (or more) as they have invested in AIG, GM and Chrysler. The couple that were very big (Wachovia, WaMu) were negotiated sales by the govt in lieu of having to take them over.

[sucks2beme]

Question for you, Shack. What does the financial gurus think about the
second wave? The housing market was one thing, but the office/retail
property crash is just ramping up. With all the closing chains and smaller
mom/pop shops, who's going to pay the rent in those strip malls and
high rise office buildings? All these chapter 11's mean get out of your
lease early chits. I've heard rumbling around Dallas about some very high
profile developments falling on hard times.

[shack]

Question for you, Shack. What does the financial gurus think about the
second wave? The housing market was one thing, but the office/retail
property crash is just ramping up. With all the closing chains and smaller
mom/pop shops, who's going to pay the rent in those strip malls and
high rise office buildings? All these chapter 11's mean get out of your
lease early chits. I've heard rumbling around Dallas about some very high
profile developments falling on hard times.

There will definitely some hits to be taken in commercial R/E. We are seeing that now, For example, I financed construction of a small commercial office project (30,000 sq ft) two and and a half years ago. The pre-construction appraisal was around $7,000,000. Cost to construct was about $5,500,000 which gave us roughly $1,500,000 equity in the project. We had to foreclose. The foreclosure appraisal was $3,750,000. We were able to sell 3 of the buildings for around $3,300,000 and have 2 buildings left appraised at $1,500,000 with $2,200,000 unpaid. We are fortunate that we can hold them for a while till the market comes back and not take a huge loss...but it is indicative of the market. We are seeing retail rental rates dropping from $25-$30 a sq ft down to $16-$17. Office is down from $22 to as low as $10. This is of course IF the space can be leased at all.

Banks will not bear all of the brunt of the pain in commercial R/E. A lot of commercial R/E debt is held by non-recourse lenders like pension funds, insurance companies and other institutional investors. Part of the purpose of the TARP (Troubled Asset Relief Program) was to give the banks the necessary capital to be able to hold on to foreclosed assets until the market returns value to those assets. As bank were charging off more and more loans, first using up loan loss reserves, then profits and finally capital...their capital levels were getting to insolvency levels. The were forced to sell assets at rock bottom prices just to replenish capital instead of holding them. TARP gives the banks more flexibility. An accounting issue called "Mark to Market" was also causing undue burdens on the banks. There may be some relief there, but it is more of a technical capital calculation issue. Still it posed problems. There will be some issues, but there is probably a shorter time frame that it will be a problem than the residential stuff and hopefully recover quicker. This is assuming that the recession does not become a prolonged problem or even a depression. It appears there are some hopeful signs that the end may come this year with a recovery to really take off sometime in late 2010. If that doesn't happen, all bets are off.

I worry more about credit card debt. It is ALL unsecured and a loss is immediate and finite. However most of it is centered in a few of the large institutions and hopefully they can withstand the losses when they really start hitting.

One final thing. Most publicly traded banks stocks are selling at a fraction of their book value. If the govt. ends up owning bank shares, they are buying LOW (the warrant strike prices have already been set at what is probably the bottom of the market). TARP...in addition to making the govt. money as the banks pay interest...could end up making a nice little profit on stock appreciation as well.