Big 3 - Thumbs Up or Down?

malorn,

If the first is true, why is it that the Big 3 execs did/could not make a
strong, simple statement as you have that could be the beginning off a
discussion of what might be a plausible, albeit difficult and costly, return to
profitability, rather than the backwards looking scape goating that they did?

I am of mixed mind on the advisability of a Big 3 bailout.. those guys aren't
making it easy to be sympathetic.

 

Yeah, let them go down and rot in hell. And let the manufacturing base of the country go down and rot in hell. Cripes, even Pat Buchanan thinks the car industry needs to be saved. You got to look at the forest, not the trees. Even the pols in Washington have trouble doing that.

 

Not many people get a second chance, and Detroit got one on December 2.

Come December 2, let's see if they did their homework, or if they are going to squander the opportunity. I admit I'm skeptical, considering their track record.

 

In the long run the American economy is remarkably efficient at re-processing failed businesses, in times of boom, bust, recession, or depression. You can bet that there are clever investors burning the midnight oil figuring out how to maximize the value of the big three, whether it's swallowing companies whole or determining that the sum of the parts is greater than the whole. If, as other posters have suggested, there is any future value in any part of these companies, there will inevitably be buyers. Also inevitable is that all the worthless parts will be shed and left in the dumpster. It's all about segregating the value from the valueless.

Things that seem fairly certain:

1. There's an enormous amount of cash sitting on the sidelines of this recession (depression) just waiting to call a bottom. When the time and price is right, there will be no shortage of buyers for the wreckage of the American automakers.
2. The Democratic party's current inclination to fund a bailout is primarily driven by their election debt to the UAW.
3. Government lending will only delay the moment of reckoning. This recession still has considerable momentum. $25B or even $700B loaned today is like a mosquito trying to stop a speeding locomotive.
4. Government cash for for a share in asset ownership would be a smarter play for the taxpayer and politicians. Everyone gets to feel good about helping out these American "institutions" and their labor force, and while it won't stop the train speeding off the cliff; when the vultures do start to pick apart the big three, they'll be buying those assets from the taxpayer, just as was done with the Resolution Trust 20 years ago. Once the RTC figured out how to properly execute asset sales (took 'em a year...) they were a real money-maker.
5. Americans will continue to purchase cars, albeit at a diminished rate while the economy sucks. There are approximately 250 million light vehicles on US roads, and even accounting for the current economy, there will be over 13 million vehicles sold in the US this year (in a good year, it's 16m.) Imports only account for 5m of these, so somebody in the US has the opportunity to build an awful lot of cars! Opportunity abhors a vacuum.
6. Big three stockholders will be hammered. OK, GM's stock is already worth only 10% of it's 52 week high. With a market cap well under $2B, it's obvious that GM is worth more dead than alive (because a breakup would shed the worthless, and negative worth assets, preserving the remaining assets that actually have value. It's ugly, but that's how it works; Darwin speaks!
7. Autoworkers, retirees, and supplier workers are going to get hammered. While much of the damage is already done, the sheer scope will likely put some sort of universal health care on the political table. Even Fox News puts the price tag of universal health care at only $110B/yr. Might be a better way to spend a fraction of that $700B.
8. The country has a remarkable opportunity to deal constructively with our dependence on foreign oil and greenhouse gasses. Presumably the PriusChat forum doesn't need a lecture on those issues. To the extent that the government gets involved with the last days of the Big 3, there should be incentives for their successors to serve these national interests.

It's time for some creative destruction! Time for the new leadership to lead!

 

Shortly after Mr. Grant joined EDS in 1991, he and EDS' top executives were invited to the Proving Ground outside Detroit to test GM's latest offerings against their foreign counterparts.

Mr. Grant, who isn't exactly an auto buff, drove the just-redesigned Cadillac DeVille, as well as a Lexus and an Infiniti,, around the 3.8-mile track.

"It didn't take Mario Andretti to figure out who had the best cars, and it wasn't General Motors," says Mr. Grant. "The DeVille, which was supposed to be General Motors' salvation, was a disaster compared to its comparable cars."

Then in early 1992, Mr. Wagoner, who'd been recently promoted to the chief financial officer position, asked Mr. Grant to set up a private meeting with Les Alberthal, EDS' chief executive.

"Les and I didn't have a clue what he wanted," recalls Mr. Grant. "For all we knew, he was coming down to fire us."

But less than 10 minutes into the dinner conversation in a private room at the Crescent Club, Mr. Wagoner unleashed a scud of a different sort.
"He starts talking about the problems GM is having: The Street is talking bankruptcy. GM is running perilously low in cash flow," Mr. Grant says. "GM needed to 'monetize' some of its investments. He didn't use the word sell, but we knew what he meant."

Mr. Grant, who experienced the Texas banking debacle firsthand, had heard this story before. "After we reattached our chins to our faces, we began to have a serious discussion about how to convert a piece of EDS into cash."



No-strings GM bailout? No way, Dallas exec urges | News for Dallas, Texas | Dallas Morning News | Cheryl Hall | Business Columnist | Dallas Morning News

 

:yield::canada::usa2:Well, Generous Motors must be kept alive!! After a bunch of mergers and buy-outs in 1908, including the now-forgotten Welsh Car, GM emerged.. (along with the Little Car Company, which became Chevrolet)
Anyhow, I think we are seeing a repeat of the 70's oil embargo effect - up until the recession hit - so the profits were being made in the SUV and Truck lines, and when car sales rose and big vehicle sales began their inevitable decline, the auto makers were, as they always seem to be, unprepared.
Since it's not their main focus, efficient smaller cars have traditionally lagged behind the big-ticket items, and now the big 3 in the US are facing another crisis! Once again, trying to figure out how to make competitive fuel-efficient autos..
With something like 1/4 to 1/5th of our economy tied to the auto sector, it's probably wise not to let them fail - but to demand better management, and a repayment plan over time (we did it with Chrysler in the 70's and Iacocca..) - that's part of the remedy.
But for the life of me I cannot figure out why the big 3 always drop the ball on good ideas - from the electric car, to real efficient hybrids, they seem unprepared for what inevitably happens when oil demand outstrips supply - maybe a better corporate structure is needed - one that rewards long-term sound design and infrastructure investments?

 

Um ... that one. We'll give them the taxpayer-backed loan, almost guaranteed. They'll still have massive layoffs, despite all this horses*** about keeping jobs, will throw up their hands, do a Chapter 11, and ride off into the sunset

Careful now, Bruce. When us mere mortals talk like that, we're "obviously" a bunch of commie-pinko Socialist troublemakers. State control and State funding are only "proper" if they support large corporations

 

I'm fairly certain a lot of deadweight and nice person-kissers flew with them. Gotta have a cheering squad

 

They did not do their case justice, unfortunately the case they did make was upstaged by some grandstanding politicians and news media. I think Rick Wagoner is exhausted and should now be replaced.
On a larger scale, there needs to be a discussion about the future of this country and whether or not this country will remian in the business of creating wealth or will spend eternity shuffling the dwindling wealth. I don't think our "friends" in Asia will just roll over and let us cry uncle any time soon.
I am amazed that this country is giving away its economy through the trade deficit at the rate of once every decade and there is barely even a conversation as to why and how to stop it.

 

Jayman I understand your cynical attitude, believe me the inaction, arrogance, poor decison making, etc from detroit over the last 40 years has cost my family far more than I would like to even think about. The decisions have been pretty good the last 3-5 years, there are just so many other factors at play in this situation. Do you think any other country in the world would let there largest manufacturing sector and 3-5% of the economy be exported? Let me know what you think?

 

Give the loan, they still have to have massive layoffs and will end up restructuring anyway.

I keep trying to get this point across: criminally incompetent management, corrupt mafia-controlled unions, backstabbing politicians from both sides of the aisles, set this train wreck in motion around 40 years ago.

I'm old enough to remember the first OPEC crisis, overnight nobody wanted a factory hotrod or huge car, they wanted small fuel efficient cars. Early 80's with that very severe recession, nobody wanted anything from the Detroit clunker-makers. Early 90's, another recession

Seems every time we went through these things, the Big Three whined about one thing or another. Emissions standards that were "impossible" to meet, until Honda made a fool of them. Crash standards that were "impossible" to meet, until Mercedes demonstrated how. Folks forget how Lee Iacocca was very much against airbags, despite the fact he's a windbag

When fuel prices went sky high again, what did GM have to offer? A "new" Camaro. What did Chrysler have to offer? A "new" Challenger. If they put the same R&D into a small car, GM would have a lot more to offer than the Made In South Korea Aveo

What the hell have we learned off history? NOTHING. Now with global crude prices nose down, any talk of energy independence is already off the table. The end result? The US will end up importing MORE of its total oil needs!

There is no reason why a country like the United States can't source 100% of its energy needs from in-country. It's just that a lot of those proven resources need to be priced +$100 a barrel to break even. Much like the United States can easily manufacture all the trinkety consumer crap in-country, but at much higher cost.

Think a BlackBerry Bold is pricey now? Assemble it in the US or Canada, add a digit to the price tag

Since it appears to be absolutely futile to convince the "majority" voters of rednecks, hillbillies, and semi-illiterate high school flunkies how criticially essential it is to plan for the next +50 years, why even bother? I've started to develop a callous "f*** you hurray for me" attitude.

My advice now? Look after yourself. We have generous government-backed loans and giveaways that can only be funded by adding to national debt, to "reward" the incompetent and criminally irresponsible fools who got us into this mess

Government has no business picking winners for economic success. Canadian Crown Corporations are a prime example of that: The Export Development Corporation, Industry Canada, the Community International Development Agency, are all examples of taxpayer black holes

The Canadian taxpayer has shoveled money into many ventures that went belly up, with nothing to show for it. Those that did "succeed," like Bombardier, would have succeeded on their own. The freebies are nothing more than lavish perks for the executives

Naturally, Crown Corps are EXEMPT from audit. The Auditor General of Canada can only report the billions that flow in. If the Crown Corp choses to do so, it can report the performance of its investements. If it choses not to do so, TFB you'll never know where the hell the money went

 

Kinda proves how incompetent they are. Maybe we should double their base salary, it may be an incentive. What the hell, the taxpayer will pay for it

Around four decades ago, the Powers To Be determined option #2 would be best for the country. It won't take Eternity to accomplish it though. Look at the "superpowers" throughout history. The Greeks, Roman Empire, Spain, France, England, all went through their peak, and have either disappeared or become irrelevant on the global stage

Again, this was very carefully planned, it didn't happen by accident or chance. There are folks who question this process, they are labeled "troublemakers," "Communists," "unpatriotic," whatever ironic phrase works. You're not supposed to question things like that

However, it's entirely appropriate to stay glued to the boob tube and bite your nails over Idol or whatever the hell is the current fad. I really don't know what the current fad is, I refuse to watch television, except for the weather in the morning, and the Propaganda (Ur, ahem, I mean "news") in the evening. So maybe 45 mins of boob tube a day, max

So, who do you root for to protect you from this? The democrats sold us out. The republicans sold us out. The unions sold us out. The corporations sold us out. Organized religion sold us out. The mass media sold us out

I really do think it's about time you slapped yourself in the face, and accepted this harsh reality. You're on your own, nobody gives a s*** about you, just as nobody gives a s*** about me either. Sorry I have to be so callous about it, but that's the way I am

Look after your family. Love them and protect them

 

I understand your anger at detroit .
GM has the Chevy Cruze just around the corner has the Chevy Malibu now at 33mpg highway, and of course just around the corner. By the way the Camaro is rated @ 30 mpg highway.

 

Your last statement is by far your most important and I make sure they are protected no matter what.

As far as the rest, I think you are right, it is part of a plan but that does not mean we have to take it.
Being colonized was part of a plan, slavery was part of a plan, fascism was part of a plan, plans are just that and can be changed. Until they take away the right to vote, organize, speak and weapons it is not written in stone.

 

I'm waiting to see what kind of a plan Detroit will be presenting in two weeks.

 

"Tomatoes yesterday, tomatoes tomorrow, but none today...."

It also strikes me as rather odd that people always focus on the higher of the two FE numbers. Shouldn't the focus be on the lower of the two numbers? When they're cranking out cars that get 30 or greater mpg City, then they've got something to brag about (unless the Highway number is lower than the City number.)

It's usually a much better practice to evaluate your success based on your worst result, not on your best. Unfortunately, the failure to use this sort of simple philosophy is part of what got us into our current sad state of affairs.

Equally unfortunately, there's not really a whole lot that can be done about it in the short term. Even if we change all the philosophies that led to this mess (assuming we could agree on what those are and what to change them to), the fix is going to take a while. That's not going to sit well with the average American; we seem to have lost not only our common sense, but our general desire to be patient and to work for a solution.

As much as it galls me to say this, letting the big three fail is not going to help anyone. Teaching the guilty the "lesson" about responsible governance is going to result in alot of collateral damage.

The best we really can do is wait for the plan, and then make sure that there's someone with at least half a brain to correct it.

 

The folks judging the "plan" will be the same group of geniuses who gave Paulson a blank check for a trillion dollars so he could bail out goldman sachs.

 

In that particular case, there wasn't (and still isn't) any plan to be judged since none was ever requested.

 

There you go again . . .
Yep, it's an irony how many millions GM spent, lobbying hard to keep future mpg averages under 35mpg ... and now poor malorn has to brag that the malibu 'may' get 30mpg under super ideal conditions.

Now to rebut, so malorn won't have to; "well, Toyota has poor mpg land barges too". Always an excuse, never the leading edge. BTW wdean, it's not tomatoes in this case, it's over ripe tomatoes.

 

Toyota has one model that GM does not with a significant advantage with mileage, the Prius, less than 10 % of their sales volume. How does that change the way two companies are looked at? One company is doomed and needs to be dismantled and the other is saving the earth and moving us forward?