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Thread: Auto Bailout

  1. #1
    Senior Member Greg E's Avatar
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    Default Auto Bailout

    I just heard on the local news that the Govt. was considering using some of the bailout money to help the auto ind. This makes no sense to me and wasn't in the deal that they "sold" us. I say let their union bail them out.

  2. #2
    Senior Member K G's Avatar
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    Greg, I think I heard an estimate today that there are 3 MILLION jobs in jeopardy if the "Big 3" fail. If you think the economy is bad today, let just ONE of the "Big 3" fail....someone's prediction of a 4500 Dow might come true.

    While I fully agree with your angst over the UAW's role in their predicament, there's a lot of blame to go around with regard to this failure. Commodities speculators drove gas to over $4/gal. this past summer, forcing the "Big 3" to come to grips with the need to build smaller more fuel-efficient cars, something they've been told but largely ignored for the last 15 years +/-. That same speculation drove consumer prices up through record fuel costs and fanned the flames of the recession we're in today.

    I just heard on the news that Chris Dodd says there aren't enough votes in the Senate to support the $28 billion the "Big 3" need to avoid failing (there goes that big gain the Dow saw today....). I have a hard time fathoming that now that the Democrats control both houses. With GM set to run out of cash in less than 6 weeks, someone had better take hold of "the wheel" 'cause the mess we're in now is just the tip of the iceberg if they fail....

    Be careful what you wish for regards,

    kg
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  3. #3
    Senior Member Greg E's Avatar
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    Kg, I certainly don't wish for anyone to fail. Just don't know where it stops. If we bail them out, people will still continue to buy Hondas and Toyotas. Is a bailout the answer or just another bandaid. Just thinking outloud.

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    Senior Member Golddogs's Avatar
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    Everyone screamed when Chrysler sought a gov loan and it ended well with them paying off the loan ahead of schedule. I am more concerned about the bank loan than one to the auto industry. They cannot fail if the economy is to survive and grow again.

    Agree with KG, oil speculators did more harm to our country than anyone has stones enough to admit and it cannot happen again.
    Never trust a dog to watch your food!

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    Senior Member YardleyLabs's Avatar
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    Unfortunately,I think there's a huge difference between the Chrysler situation under Iaccoca and the GM situation under current management. I hate to contemplate what will happen if GM et al go under. However, in my mind the price of a bailout of GM is resignation without benefits for current executive management and the Board. Every plan that they have implemented for years has done nothing to stem their losses of cash and market share. There current request does nothing but by time for more of the same. I would rather see them file for chapter 11 and then look at government assistance in coming out of bankruptcy with an appropriate shedding of contracts, pension obligations, management severance benefits, etc. That may be the only approach for the other companies as well.

  6. #6
    Senior Member Buzz's Avatar
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    Quote Originally Posted by Golddogs View Post
    Everyone screamed when Chrysler sought a gov loan and it ended well with them paying off the loan ahead of schedule. I am more concerned about the bank loan than one to the auto industry. They cannot fail if the economy is to survive and grow again.

    Agree with KG, oil speculators did more harm to our country than anyone has stones enough to admit and it cannot happen again.
    I agree. If they fail the America we knew I fear will never return. Any idea that they can successfully reorganize under chapter 11 in the current financial climate is wishful thinking. They could NEVER get financing to operate on during reorganization. The government would need to provide it. And if that's the case, why not bail them out with reorganization requirements as part of the deal. Otherwise, they will need to go straight to chapter 7, and all three will go down together along with the suppliers.

    I keep hearing that no one wants to buy big gas guzzlers. Well, that's what Americans wanted until they found out how painful $4 gas can be. The foreign makers were scrambling to make big trucks. Think Toyota and the Tundra. Nissan-Renault were looking at a merger with Chrysler. Nissan-Renault would have supplied smaller high milage cars to Chrysler, and Chrysler was to supply large trucks to Nissan-Renault.

    Foreign car sales have tanked as well. There are few with the stones to go out and make a big purchase, even if they can afford it. I bought a new Dodge 1500 this summer and I wonder about the wisdom of getting such a big ticket item. But I NEEDED a new truck... Anyhow with their dropping sales, the foreign makers don't have a huge number of retirees to support, their healthcare costs are MUCH lower because their workforce is much younger, and their wage structure is much more reasonable.

    This election, the folks voted for change. Well, I believe change is coming alright. There is going to be change that NO ONE likes, I don't care if you're right or left of the aisle... I wish I was 20 years younger because I wish I had that time to recover from whatever we are going to have to struggle through.
    Last edited by Buzz; 11-13-2008 at 07:23 PM.
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    Senior Member YardleyLabs's Avatar
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    The advantage of chapter 11 is that it opens all standing contracts to renegotiation or rejection. That includes both labor contracts and management contracts as well as all supplier contracts. Bond holder liabilities and other debt instruments are frozen pending workout. I agree that the government would be the only possible source of working capital under Chapter 11, but the requirements of court supervision would make balancing the books an immediate requirement instead of a long term objective as it appears to be now. Assuming responsibility for financing the cash flow needs of the industry without the tools of chapter 11 might easily become as expensive as the war in Iraq with no end in sight.

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    Senior Member K G's Avatar
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    I personally think that the government is waiting until GM and Chrysler are on the brink of bankruptcy so that they can ride to their aid like the White Knight (not Verdell....) comes to their aid ONLY if they file chapter 11 for the reasons Jeff listed. Even if they are allowed a share of government aid WITHOUT filing ch 11, they MUST be held accountable for how they do their business.....aid with strenuous conditions, if you will.

    No more AIG's regards,

    kg
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    Senior Member Buzz's Avatar
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    My bet, unless they have assurances of working capital for reorganization from the government, they will not go chapter 11, but chapter 7. Unfortunately, I think we're going to find out one way or another.
    "For everyone to whom much is given, of him shall much be required." -- Luke 12:48

    Raven - Moneybird's Black Magic Marker***
    (Esprit's Power Play x Trumarc's Lean Cuisine)
    Mick - Moneybird's Jumpin' Jack Flash***
    (Clubmead's Road Warrior x Oakdale Whitewater Devil Dog)
    Peerless - Moneybird's Sole Survivor
    (Two River's Lucky Willie x Moneybird's Black Magic Marker)

  10. #10
    Senior Member labdoc's Avatar
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    I heard a couple interesting points on this subject today. First the question was posed if a car maker filed bankruptcy, many if not most people would refuse to buy from the maker because of concern for availability of future parts. I would agree that if GM were filing for Chapter 11, I would have to get one smoking deal to even consider buying a vehicle from them. It is much different than the airlines, etc. where my purchase is for now and I don't care about 5 years down the road.

    The second point that made sense was if a bailout were given (I believe it should NOT be), why not, say, purchase $25 billion worth of the Volt or some vehicle which is an improvement on what is available. This would allow GM to crank up manufacturing for hybrid/electric cars, put them on the market through a reduced price government sale, and switch their emphasis from the old dinosaurs that they continue to produce. In other words require a better product to be produced in exchange for the bailout cash.

    The Dems and Republicans must soon sit down and decide what the last bailout will be or we will all be working for the government 365 days a year just to pay the tax increase that will be necessary. Anyone thinking of getting into the horse drawn cart repair business?
    Curt

    Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote!----Benjamin Franklin

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