It’s the collateral damage… think of all those innocents who had nothing to do with GM’s recidivist mismanagement who will nevertheless be hurt
This probably will not go down as a classic (say, the Apple 1984 commercial or the “Harry and Louise” campaign that helped torpedo the Clinton health care plan). And there is a “it really isn’t our fault, we spent billions on fuel efficiency” bit. Right. Half-heartedly and late. But this is nevertheless an interesting addition to the usual corporate PR campaign and does make its case succinctly.
Via YouTube (hat tip Clusterstock).
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Doesn’t a 4 million square mile country absolutely need to at least retain the ability to manufacture trucks? Or should I just go ahead and buy that horse I have been eying?
the US manufactures vehicles profitably: hondas, toyotas, bmws, mercedeses, nissans. but all those companies run their business for profit and do not expect government bailout. in contrast gm, ford, and chrysler expect a repeat of the chrysler bailout. if it happened once, it should happen as many times as it needs to.
i think it would be easier for each of them to buy a small bank or convert to bank holding company than expect separate bailout plan for them.
The ad company put a pretty compelling and honest face on the immediate aspects of the story. What is completely lacking is a longer-term understanding of the danger that zombie companies present to economies. That scar tissue can really hinder movement and cause a lot of pain.
Their spectacular cash burn rate serves to focus their mind on the short-term impact of their collapse, which is fairly represented by this video.
We pay congress to look at broad issues that last longer than the next few years, and the pain of a single sector, as important as it may be.
Teach your Congressman about the lasting pain that old economic scars cause, and how badly a heavily scarred body works.
Or, the catchier “Just say NO to Zombies”
Has anyone thought about the collateral damage to saving GM?
How many companies are not going to have access to capital because GM will suck the oxygen out of the capital market? Money misdirected to save GM jobs won’t be available to save jobs at better run companies.
We all need saved! GM needs to be re-invented, not temporarily re-stored so that they can limp along and then not be efficient again and again in an endless cycle of stupidity! GM and Ford, et al, need to fire all management and stop playing games with union wages, and then they need to start from scratch and design an affordable car that is highly fuel efficient and dependable. The crap they sell is over-priced, inefficient and depreciates far to rapidly, because there is no design integrity — not to mention the lack of integrity within the business model, which is linked to core wall street accounting fraud, outdated GAAP accounting which is supercharged with FASB fraud, non-SEC-regulation and synthetic derivative manipulation linked to a casino table. Did I mention they have crappy engineers inside and outside the financial department? These auto makers have focused on financial engineering versus designing cars and trucks and they all need to be shit-canned Monday and the entire industry needs an emergency re-design. I wonder if the entire thing should just be automated with computers and robots and get rid of all the humans that have made this Darwinistic enterprise into a chaotic network of financial cancer cells that will not survive.
These auto makers are all being promised twice the funding that Chrysler was given, back in the days when Jimmy Carter bailed them out for $1.5 Billion; adjusted for inflation, these idiots are getting twice as much, and they still have no clue, no plan, no contract, no details, nothing in the way of innovation — they just want more fuc-ing cash from taxpayers — to blow on the insiders, (who as God is my witness, and who will strike me dead in about 5 minutes) — will steal every last penny they can and then spend it on golf, cocaine, booze, homes, foreign cars that are nice, hookers, wall street lobby groups… ok, I guess I’m safe … thanks…
In related thinking, look at the charts here:
Slow Recovery of Labor Markets
http://economistsview.typepad.com/
If firms also install labor saving equipment at a greater rate than in the past as the recovery begins, or if the equipment is installed at the same rate but it is even less labor intensive than in the past, the growth in employment could be even slower.
oh come on everyone
this country cant give a hail mary pass for the little amount of 25 billion– to see if they can fly
YET we give banks and gambling companies( also known as investment banks ) trillions??
this seems unreal– so what is a few billion for people who will actually get the money- blue collar workers VS RICH BANKERS???
this who arguement is to try to break up unions– little else
They may have to wait until 2009 unless the "Pubs & Bush capitulate.
===========================
G.O.P. Senators Oppose Auto Bailout
Published: November 16, 2008
WASHINGTON (AP) — Top Republican senators said Sunday they will oppose a Democratic plan to bail out Detroit automakers, calling the U.S. industry a “dinosaur” whose “day of reckoning” is coming. Their opposition raises serious doubts about whether the plan will pass in this week’s postelection session.
Full article
==========================
It is important to distinguish between the prospects of the three automakers separately. Chrysler was in deep trouble even before 2008 which says a lot about their prospects. Despite insurers withdrawing supplier credit insurance for both GM and Ford, the rumour is that major suppliers are still delivering to Ford but not to GM. This probably reflects the relative sales performances of the companies with Ford sales down some 30 percent while GM sales are down a lot more.
There is a rather interesting development with GM plants in Germany going to the German government almost as a separate European entity for a bailout. Rumours are GM Europe may be bailed out on the condition that no capital is sent to the US parent. GM Europe up until the last quarter has been making a reasonable profit and the bailout is thought to combat the stance that supplier credit insurers have taken. There then becomes a risk that GM Europe will compete with GM US.
There is also no news on the profitable Australian arm of GM which you might expect to go its separate ways. This leaves the question of how bad the US operations really are and will they turn out to be another bottomless pit like AIG. Any bailout will also be seen as protectionism if share holders and current management are not wiped out. Any trade wars are likely to cause even more widespread damage, so the governments hands may well be tied, by foreign expectations.
President Elect Obama said last night on '60 Minutes' that…
1) The US Gov will do whatever it takes to revive the economy.
2) We shouldn't worry about the deficit next year or even the year after.
3)The most important thing is that we avoid a deepening recession.
4)Obama also said the government needs to provide assistance to the automobile industry. Such aid — in the form of a “bridge loan,'' he suggested — must be provided on condition that management, labor, suppliers and lenders come up with a plan to make the industry “sustainable,'' he said.
So there it is, right from Mr Obama's mouth. Big Brother, the behemoth, will tell GM (and others) how to manage the auto business. Watching the outcome should be very interesting since neither of them have proven that they can manage anything, at least in recent memory.
It also seems Mr Obama is on the same page as Cheney. Cheney said 'The American Way Of Life Is Not Negotiable'…Mr Obama seems willing to do all that is possible to see that Americans do not have to confront change. Good luck on that one.
I wonder if anyone has given Mr Obama an estimate of how much new treasury debt can be issued before the paper stops selling? It sounds like they think that they can continue to sell treasuries for at least two years…Anyone care to speculate on this assumption?
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3YHt2_TgEpo&refer=home
@doc Holiday
glad I'm not the only one peeved at the GAAP problem, I have been since Reagan.
The automakers had a chance, when California made them go for fuel efficacy, but as soon as the the time limit was up, recalled all of their electric cars, only to have Toyota which out of fear of being left behind, started off their own R&D project, with out Government support. who's laughing now. Bo ho for US auto industry.
I bring up my pet social license issue, in regard to their whining. They for so long, FEEL that the American people were in their pocket, a part of the American Aesthetic like Baseball or Apple pie and could churn out POS cars that ate more gas than the ones I drove in the 70s. I say sell off the parts and set up, the over payed workers to get a new life and the rest to the creditors. Time for some new blood to reinvent the American auto industry. Anyone thinking of giving me a hard time on the statement of "over payed auto workers". Please explain how anyone holding a air powered rattle gun to screw down the same 5 bolts all day is worth more than $20 an hour not $75 and I'm being nice with the 20 bucks.
@anon,
GM or Holden as its called here has the big thumbs up from PM Kevin Rudd, he just did a news conference today. The Government and Holden are going to work together to start the a Green car business for Austrian market and hopefully export. Kyoto was a big part of his election campaign. To sign it.
@river
Hope Obama doesn't get all romantic/nostalgic/good old days on us. We need a new plan.
Hope I didn't waste my vote on a sentimentalist. We've had 8 years of that all ready.
Skippy
I don’t think people who frequent YouTube have a lot of spare money to help GM. Unless they were advertising cars for sale? Or maybe negative interest financing? A bake sale?
eh,
they dont want their money, they want their vote or support, the money is from all taxpayers at the coercive hands of the government through taxation.
Moving on, if I were sitting in the boardroom watching and listening to that presentation I would say….so where is the rest of the presentation.
They just described the environment and that they are important, but those are ridiculous reasons to lend or invest. The dealership angle is stupid, sorry but saving dealers should absolutely NOT be part of the deal, dealers pop up and collapse like cards, they arent strategucally important to anyone….minding what effects a dealer collapse would have is another matter, in terms of short term price etc. But spending one dime on dealers is a wasted dime.
The critical aspects are manufacturers, design and supply chain leading up to manufacture. There are important elements in there that one should think twice about before letting it be ruined beyond repair.
What was missing from the presentation is, what will the loans enable, whats the workout plan, what are the milestones what does the industry look like after the money is given. I have no objection to assisting the industry to transition, but I want to know what they are planning on transitioning to, and when.
GM needs to go into pre set chapter 11, as does chrysler. COmbine the two under bankruptcy protection. Ford is healthier and should not be disadvantaged unecessarily if it could avoid bankruptcy. But before a cheque is cut it needs to be clear on for what, a detailed plan is required.
For those who say the government should be invilved need to ask the question of how much was caused by government, government incentives to build trucks (taxes that allowed SUV’s to be classed as cars). Government fuel standards, that didnt really acheive what they intended, the implicit support of unionization and support for some of the outsized demands, aprticularly on health benefits, the failure to force the car companies to recognize their true costs of health benefits (especially during good times when the transition could have been less painful). Government has been part of this and auto industry management at various times has been fat, happy and stupid….why shareholders never punished them I will never know.
Summary: Presentation has only set out background and environment, no plan presented, inclusion of spurious elements like dealers, and no discussion of end state, transition state or goal. I hate to think how much they spent on that.
Sorry, all I got out of that video plea was, “If you do not bail us out, I will kill this cute little bunny rabbit!“
I make the dice that hang from the rear view mirrors in cars. Can I qualify for the auto-parts bailout?
I’m not really surprised; as soon as Bush’s Bailout Bill was passed, I figured every major US corporation that’s seen a drop in profits would line up to drink from the Free Money Machine.
After all, the bill expressly authorized Paulson to use OUR money on any debt he deemed worthwhile, whether it was a bank default loan, credit card, car, student, mortgage, or any other debt.
What’s depressing is Congress is unwilling or unable to do anything to rein in Paulson’s uncontrolled money giveaway.
@river mentioned the quote ‘The American Way Of Life Is Not Negotiable’ – this was actually first said by Presídent George H.W. Bush in 1992 at the Rio Earth Summit. It is in fact the defining global political statement for the historical period since the collapse of the Soviet Union. The situation of the Big 3 in Detroit is just a tiny part of the global catastrophe which is unfolding before out eyes as a result of the program based on this statement.
The glossy cover picture for this program was “globalization” – internationally owned corporations operating globally in both marketing and production. The commercial that Yves has posted reveals the small print. Apparently the Detroit automakers are “domestic automakers” , the others (with factories in the southern states) are foreign. No matter that there are American shareholders in both, the workers are American, the buyers are American. You see, “globalization” was just a fairy tale that was sold to unsuspecting foreigners, the real name of the game is “what’s yours is mine and what’s mine is my own”, where for “me” and “mine” and “my” write USA.
Soon the truth will be out. Then it will be up to the USA with its military might, greater than the rest of the world put together, to show: are you going to beat us into accepting your “American way of life” or are you going to accept that you are one of us, maybe still for a while first among equals, but none the less no more than equal.
As for Obama: a presidency is made above all by power and events, not by the campaign rhetoric that went before.
Peter Schiff has an interesting take on the 'Detroit Bailout'…Here is a comment and link to same. Yves, thanks for the great blog and I hope your travels are swift, safe and comfortable.
…snip…'The government should let the Big Three fail not because we no longer need an auto industry, but because we desperately do. What we do not need is the bloated, inefficient auto industry that we have today. By allowing the Big Three to fail, their capacity will be turned over to new owners who will be able to acquire the means of production at fire sale prices and hire workers at globally competitive wages. The result will be a more efficient auto industry making cars that people around the world actually want to buy at prices they can afford. Such auto makers could conceivably be profitable and could become the cornerstone of a manufacturing renaissance in the United States. In contrast, Ford, Chrysler and GM are never ending money pits that threaten to swallow a good deal of our economy.'…snip…
Mr Schiff has much more to say at the link below…
http://europac.net/externalframeset.asp?from=home&id=14645
Not that I was following this closely, but isn’t one of the problems of US car industry that the companies are effectively pension/health insurance companies with most of the assets invested in not-that-well-performing car manufacturer?
IIRC, at one of them (GM?) about 2k of each car sold were to pay for pensions and health insurance (I could have the number wrong, it was really a long time I saw this).
NY Times: "If Detroit Falls, Foreign Makers Could be Buffer"
"The failure of one or more of Detroit’s Big Three automakers would put a huge initial dent in American manufacturing, but in time foreign car companies would pick up the slack by stepping up production in their plants here, many industry experts and economists say."
http://www.nytimes.com/2008/11/17/business/economy/17impact.html?_r=1&hp&oref=slogin
The film asks over and over again, “what happens if we allow the auto industry to collapse?”. The auto industry has already collapsed–past tense. The question now is how to best effect a recovery. Should we throw good money after bad to management that has proven over many decades that they can’t turn money into value?
Bankruptcy is the best way to clean house and get the industry moving forward again.
An AP article on Yahoo yesterday reported that the financial crisis in the auto industry goes all the way down the supply chain. Order volumes have collapsed for the auto parts makers, and they are also having trouble getting financing. The upshot of the article was that a bailout of the Big Three is futile unless the entire industry is bailed out, top to bottom. The auto makers can’t make cars without *all* the parts. For what it’s worth, foreign car makers with U.S. plants are also supposed to be vulnerable to this. Sorry, I don’t have the link offhand.
the terrorists win!
Disingenuous video. Bankruptcy does not equal shutdown.
Supplier shutdown is also a false boogeyman. Suppliers are among the most senior creditors, so they should make out OK in a BK, as long as the buyer continues to operate.
GM cannot support the dumb employee benefit concessions it made when times were good. They can’t afford them, but it’s also politically untenable to let retirees swing. Result: nationalize the benefits. The cost of that nationalization should be to wipe out shareholders and management. This starts to sound a lot like a standard BK.
By the numbers and quality measures, GM is now quite competitive, were it not for the stupid product mix and stupid retirement deals.
The way the big three present their argument in this video only further confirms their arrogance. Every figure quoted was in terms of the auto industry, as if they were all of it. Despite their wistful memories of the past, Ford, GM, and Chrysler are no longer the auto industry. They propose that if they were to collapse then nobody else could step into their place. As if no other companies are capable of building cars, that their vendors cannot sell to someone else, and that all those threatened jobs exist solely on the (formerly) big three’s behalf. No doubt the rest of the industry, and the nation, will throw up it’s arms in hopelessness because only GM can build tanks.
Has anyone here looked at trends for sales? I have no idea how many cars are selling, but that is the bottom line to focus on.
An analogy might be to think of a bail out for Krispy Cream Donuts and then break down sales trends and ask, how many donuts need to be sold to keep the doors open, and then go a step beyond that, and ask what if we can’t sell that many donuts, what if we simply don’t have enough people out there who will walk in and buy donuts?
I like this, yah … what if Krispy has a business plan to expand inventory and then they find out, they have to donate 70% of the donuts at the end of the day to charities, i.e, what if Krispy becomes a social welfare conduit that remains in business, as a result of being subsidized to give donuts away … huh, huh, punk, what about that?
So, what if we bail out GM and Ford, so that they can churn out more crap cars, just because Obama thinks that a few thousand union employees should be making $30/hr to make crap cars … huh, huh?
I would like to know what prices GM, Ford and Chrysler would need to charge so they do make a profit?????I should probably go and buy a bike…..
boy oh boy
what bothers me most is that people seem to accept the fact that 1-2 trillion $ will be given to banks – yet a meesely 25 billion $ cant be given to the auto industry to help them out??
people want all sorts of conditions placed on the auto bailout — yet there are none for the bankers??
omg — 25 billion is NOTHING compared to what the bankers get!!
yet all this desire to put millions of people in distress
unbelievable— makes me think that the only people here posting are those people in the investment banking (gambling)industry
People – wake up. All those foreign manufacturers are subsidized by their home country governments. For example, U.S. manufacturers operate with the burden of $1500 per vehicle in health care costs that the foreign competition does not bear. (There are other forms of subsidies as well.)
You can also see this in Canada where the Big-3 operate many plants – many more than most U.S. citizens realize. Why is this? Because the Canadian government provides health care for all citizens. The Big-3 doesn’t have to pick up that bill over there.
And for those that think the Big-3 are not competitive: Check out the recent product offerings. Also check the J.D. Power Quality ratings. GM has received the “Car of the Year” award several times in the last few years.
And then there is the strategic military concern: Detroit was the “Arsenal of Democracy” during WWII. Be very wary of losing our ability to manufacture military equipment.
And in general, manufacturing is the keystone to successful, productive societies. Now many understand that Banking and Finance is an industry of smoke and mirrors characterized by delusion and trickery. Not so for tangible goods that come from a manufacturing capability. It’s the manufacturing jobs that created the middle class in America – which defines our prosperity.
We have much at stake here.
Indeed they hav failed already, in that they deliver a marginal quality product, not a great price, and without the fuel efficiency. I won’t even go into the furry-toothed conspiracies on technologies bought up by the Big 3 and then never implemented (100 mpg carburetor, etc). They act like there are no other mfg’ers in the US. I bought my Toyota, made at the NUMI factory in Fremont, CA, and it’s lasted since 1990, STILL runs great with very little cost to be for replacement parts. That proved to me that we could build a quality car in America, but that something else was wrong in Detroit that they didn’t do it. BMW runs plants in the Carolinas, Tennessee makes Saturns. I’m sure they don’t have onerous bene’s to foist, but it’s not the only issue. I knew there was a big problem when the quality and efficiency minded Germans got too burned on Chrysler.
Why does everyone assume letting Detroit fail implies the end of GM, Ford and Chrysler? They will still be around, in one form or another. While the downfall will be painful, it will collectively be less painful than feeding zombie corporations for decades (granted I believe the big three have been zombies since the 80’s via their lobbying efforts). The industry needs a cathartic event to reduce its debt burden, flush its current stagnant culture and bring forth innovation through new investors.
I got the same video sent by their marketing folks when I wrote the post US Automakers Bailout – A Bridge to Bankruptcy or a Road to Salvation . If only their operations were as slick as their marketing, maybe they would not be in this predicament. They will be bailed though, in my opnion anyway.
I have a question……
Do Honda and Toyota need a bailout?
Answer: NO!!!!
Next question…….
Why don’t they need a bailout?
Answer: Because they have been handing GM, Ford, and Chrysler their collective A$$ for the last 20 years!
Honda and Toyota have been focused on QUALITY and FUEL EFFICIENCY for decades.
I’ve been totally dumbfounded at the product line that the Big 3 have been producing for the last 10 years. Only until the gas pump was held to their head did they make ANY changes.
I say let them go into bankruptcy…..scale down their operations….make the necessary product changes.
This notion that the auto industry is going to disappear is utter nonsense. Yes, lots of jobs are going to be lost, but that MUST happen no matter what.
why is it that there is more emotion about the desire to not bail out the automakers than there was about bailing out the banks??
the auto industry is asking less than the bankers ever did!!
and i dont see the money given to the autos — going to bonuses for the execx of these auto companies!!
why not try to save the pain and the jobs of millions?? —
i just dont get it here — ok for bankers — not for blue collar workers!!???
We should consider the potential innovation that can be unlocked or unleashed (would be a better word) without GM in its present form and in its present management preserving its staid form.
Ultimately, this unleashed potential would spur new production and employment, and we will all be better off.
@ anon 7:37 – there was far more outrage expressed here and everywhere about bailing out the banks. Most every poster here is far more empathetic to the plight of the auto industry. For the banksters, they deserve the heel of our boots and not the wallets our kleptocratic lawmakers saw fit to rent from us
Let’s pay our dutiful respects to the engines of growth in the last century today and wake up to a new dawn in the morning.
"And in general, manufacturing is the keystone to successful, productive societies."
and agriculture is the keystone to healthy, productive citizens…of course agriculture is currently 1.6% of GDP.
and lest we forget the Great American Streetcar scandal:
http://en.wikipedia.org/wiki/General_Motors_streetcar_conspiracy
of course, if we had better public transportation in our urban areas and wouldn't have to rely on automobiles so much, perhaps we wouldn't have the need for so much petrol???
memo to GM: karma's a b*atch.
let em die on the vine and give any public incentive so someone can open their vaults & start producing all the cool innovative sustainable vehicles that they have buried over the decades.
memo to UAW: welcome to reality chaps.
capitalism's a b*atch.
time to start using your brains.
if america's so great, then prove it.
anon, you might not have noticed, but I think most of the posters on this blog consider the $trillion bailout of the banks poorly conceived.
I was surprised to see this week’s Barron’s cover put together a plan that would have drawn ridicule from the conservative press just a few months ago. Jim McTague wrote up the article as a consensus of Barrons staffers, starting with $100 Billion of Stimulus, 2nd, support aid for Ford, GM, 3rd, help homeowners in exchange for a share of future profits (capital gains taxes, perhaps?), etc, etc.
Barrons didn’t even have the usual TG Donlan counterpoint on the back flap (last week, Donlan’s editorial was “Free to Fail”, featuring the Corvair).
This is rather on the scale of the Tsunami that hit Thailand a few years ago.
Personally, I think a lot of the fallout in the “real” economy can be attributed to the President and Mr. Paulson’s hysterical take on the state of the world. Thought I guess the financial plumbing actually was in pretty bad shape before they came around that view.
If the US auto industry hadn’t blocked higher fuel efficiency standards for the past couple decades, but instead had embraced them, they’d be relevant, and the USA and the world would would be a lot more secure.
I don’t know how Obama might find a way to resurrect the US auto industry. Perhaps like the case with Nixon going to China, Obama might pull off some miraculous deal.
If Obama had the big time gambling instincts of Bush, he’d create an emergency in which the only way to avoid a depression was by going to single payer health care. Might be correct if that leads to a reform of the US auto industry, and might be achieved if he doesn’t blink.
hondas, toyotas, bmws, mercedes, nissans.
Which 2 of those make Detroit sized cars? Hint: Eliminate all the choices of the Far/Near East.
Which of those 2 is even in the price range of most who insist on the Detroit way of affordable performance in a non-compact package? None.
Honda and Toyota have been focused on …. for decades.
The only thing they know is to build underperforming FWD 4cyl (or worse) compacts for the masses. Detroit manufacturers actually put something a bit more substantial and have customers for it.
Bail Detroit out unconditionally until the transplants start making cars that aren’t 2 choices – extremely small/underpowered or extremely expensive. That’s all you’ll get out of the resulting oligopoly of Far Eastern auto manufacturers; exorbitance will be the the only thing you get out of the rest.
i just dont get it here — ok for bankers — not for blue collar workers!!???
They want to see Detroit fail, despite what is admitted in public. They rationalize it by only looking at the larger picture.
To let Detroit fail is to let irrational hate to win. Be prepared for a lack of choice like none other.