Edmunds CarPool

I don't have an alternative and generally agree with some of the points Karl wrote. There is not going to be a bankruptcy and the loan is going to pass. Uncle Sam would lose $156 billion in taxes over 3 years if GM went under and add to that figure if Ford and Chrysler go as well. In one year alone, GM purchased $30billion in parts from 46 different states which generates taxes and jobs all across the country. All this huffing and puffing by the government (and media pundits) are just sharades that can be used for future personal endeavors. Basically, these people will be able to bombard us with future policital ads saying, "I stood up against the Big Bad Detroit automakers and said NO to a government give-away." The fact of the matter is that no matter what the CEOs present to congress, the preception will not change. Wall street is allowed to transcend greed, yet Detroit has to present proof for the loan that's a fraction of the previous bank bailout package? Also, the money they are requesting is already appropriated so it will be spent one way or another. The same hyprocrisy that rules Washington is now targeting Detroit and the few writers reporting on this are muffled. I'm curious to know if those on the Hill who are telling CEOs to stop flying in private jets will relinquish some of those fringe benefits they receive on tax payer dollars? I reviewed the 13 page presentation that Rick Wagoner delivered and also reviewed remarks he made last week none of which, coincidentally, have been shared to the public through these idoit "expert" writers. What I read were good concrete facts of the state of the company prior to the economic meltdown. What those facts illustrated were great strides in cost reduction and greatly improved products. Everyone with a pen and an audience is now an instant auto industry expert and that fact that people actually listen to some of this nonsense is amazing. The worst was a piece that Campbell Brown put together last week which claims that the Big 3 needs 70mpg cars now in order to compete with the Japanese companies. Oh, I can't forget Michael Moore's mindless rant on Larry King Live. He said, "... look at the cars they (Big3) are trying to sell at the dealerships" implying they are offering pure trash to the market place. I'd love to know when he last visited an American car dealership.

" remember hearing a stat that Toyota (between all 3 brands) has 1,500 dealers and GM has about 7,000. They both have the same market share. It doesn't take a rocket scientist to figure out the problem - GM needs to close some and consolidate the rest of their dealers"

That's my favorite stat of all time. A large portion of GM's dealerships have been around long before Toyota was even a player in this market. Comparing current market share using the number of dealerships is a waste of time unless you understand how and why they ended up having so many dealerhips in the first place. If Toyota was producing cars after the WWII here in the US, they'd have a bunch more dealerships as well.

1. The bailout will happen

2. Everything we saw and heard last week in Washington was grandstanding and the facts were irrelevant

3. Much of the restructuring people are demanding has already happened or is underway.

4. The execs that are in charge now werent in charge 25 years ago (or 3 in some cases) so its pure stupidity for pundits and congressmen to be lecturing them about "decades" of mismanagement. That's as logical as blaming GW Bush for mistakes made by Jimmy Carter.

5. In spite of all this talk of the "new media" last week's events show that American media operate with a herd mentality and independent thinking is discouraged. The explosion of the internet and 24hr news channels has led to an abundance of talking heads who really arent all that knowledgable about anything. For the last two weeks I have been reading and watching comments by bloggers, left wing idiots, right wing idiots, southern politicians who know nothing about cars and authors with agendas but I have seen NOTHING from anyone who knows something substantive about the Big 3's woes or the industry as a whole. Americans have short attention spans and like the idea of a scapegoat so the media is sure to provide us with neat narratives that appeases the viewing public.

6. Bankruptcy would be a disaster and it's being pushed primarily by people with an anti union agenda who see it as a way to cripple the UAW permanently. Some have doubted that GM would be able to void contracts easily as the pundits keep suggesting. In addition, GM and Chrysler would be unable to obtain financing to sustain operations during bankruptcy in this market. Those pushing Chapter 11 would love to see the Big 3 fail and know it would be a sure fire way to boost the fortunes of their favorite Asian based automakers.

7. The dealer issue is being solved through attrition so Chap 11 isnt required to thin the ranks of Big 3 dealers. Hundreds of dealers that provide Detroit's products are going out of business every year.

1487 - Bankruptcy would not be a disaster if they negotiate a pre-packaged bankruptcy with terms and loans agreed to in advance. It would show financing companies that they have a plan to move forward.

"Those pushing Chapter 11 would love to see the Big 3 fail and know it would be a sure fire way to boost the fortunes of their favorite Asian based automakers." - That's pure BS. I want to buy an American car, but I want to WANT TO buy one, not just out of some patriotic duty. If GM and Ford can bring their businesses in to the 21st century they can start making cars people want to buy without the shackles of the huge cost burden per vehicle they bear over the Asian and European automakers. The knowledge and some of the product is there already, just imagine what they could do if the playing field were level.

Some comments on bankruptcy for the GM:

- A "normal" bankruptcy would be a disaster. GM would never be able to get the financing required to get out of bankruptcy. Plus, no way would anyone plunk down $25-30K on a car that has to be maintained for around 5-8 years and then have some resale value to support the next car purchase. Especially when they have so many other car companies available to buy from. A "normal" bankruptcy would quickly lead to liquidation, which would be a huge (dare I say gargantuan) blow to the economy.

- I'm not sure what a "prepackaged" bankruptcy would accomplish for GM. I assume this means a bankruptcy with financing guaranteed by the government. Would it mean that the government (i.e. the Democrats) would let GM slash blue-collar wages down to $12/hour with little medical coverage. With the Dems in control I doubt they would allow it. Would they allow GM to arbitrarily dissolve one-half to two-thirds of their dealer body? Just put all those dealers out of business and forget about state franchise laws? Again, I doubt it. So what is the point of a "prepackaged" bankruptcy again? How will our government help solve GM real problems (two many brands and dealers)?

Seems to me that the core issue is legacy pension benefits. If these companies continue their death spiral to it's conclusion, how much is it going to cost taxpayers? The deal that can be offered is for a government guarantee of some reduced retirement benefit in exchange for major concessions from everyone. I assume that congress could pass a law that requires all parties involved to restructure their part to get access to the money and avoid lawsuits.

To keep companies alive right now, government money appropriated for "green" technology could be redirected towards helping GM and Ford (Chrysler has no independent future) set up factories to build better small cars. Lots of conventional subcompacts probably do more for overall fuel consumption than a few token hybrids.

vaca,

Ignore the Kool Aid being sold by pundits who have never negotiated a bankruptcy. No BR experts are pushing for CHap 11, only business types and republicans who want to see the union contracts eviscorated (Sp?). I just read an article today outlining all the reasons Chap 11 wouldn't work. No company as large as GM has EVER underdone a prepack bankruptcy. Why are people so obsessed with taking this risk? There is already discussion about presenting new UAW concessions when they return to DC. All of the Big 3 have laid off thousands of workers and those savings will materialize in the next quarter. If the market stabilizes they can survive 2009 but if it tanks further and sales decrease more nothing will save them. If the US auto market contracts much more you may see other players pulling out in the future.

The CEO of Delta said there is no way Chap 11 would work for an auto company and he also said in today's market an airline couldnt emerge from Chap 11. The credit freeze has all but eliminated the possibility of a succussful filing. In addition, Delphi filed 4 years ago and has yet to recover. GM is much bigger than Delphi and has far more creditors. Also, the failing of GM to pay its obligations could be catastrophic for the financial industry which holds many of its bonds.

"Seems to me that the core issue is legacy pension benefits. If these companies continue their death spiral to it's conclusion, how much is it going to cost taxpayers?"

Its going to cost billions if they go under. The pensions will be absorbed by the feds.

Want to save the big three? Bring in public health care.

Without the huge cost of paying for health care for employees (both active and retired), the companies could manage on their own.

"Want to save the big three? Bring in public health care."

If providing health care is bringing down the Big 3, who's gonna bailout the Federal Government's attempt at it?

Amen brother.

What's wrong with healthcare in the U.S.? It suffers from massive inefficiencies and corruption, resulting in both outrageous costs and atrocious service.

Hmmm...I know! Let's make the government run it!

After that, we'll have the Taliban take over Iraq's free thinking and equal rights for women initiatives.

Easy, the taxpayers!

"Easy, the taxpayers!"

Who do you think is paying for all these bailouts? The taxpayer. At least this way you get something good and long lasting out of it.

The government wouldn't run healthcare, they would just pay for it. It would eliminate the giant insurance companies that serve no purpose other then raise the cost of healthcare.

Whether you pay through your taxes or pay through premiums, you still pay for it.

By getting rid of the middle man everyone pays evenly and low income people don't have to suffer poor (or no) healthcare.

On topic, companies wouldn't get stuck with healthcare cost for employees that no longer work there. Legacy costs are what's killing the big three.

First off, I'd rather have an inefficient health care system than a corrupt one that offers nothing in return for my premiums. Second, the government already has various healthcare subsidiaries (ie, TriCare, MediCare, et al). While I'm not a subject matter expert, I do believe these organizations do just fine.

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Ok, now bankruptcy.
Most of these "moon shot" ideas everyone is coming up with is precisely what Ch 11 is, minus the B word. For the Fed to provide the exact same service would be asinine.

I for one don't agree with a "prepackaged bankruptcy." It's a clever idea, but that's exactly why Delphi is in the shape it's in. Delphi went to the court with a detailed plan on how it would emerge from bankruptcy, only the plan turned out to be shortsighted. They drew up another one (and much more expensive) and went through the same process. That's why they've never gotten back on their feet. What I would suggest is an outline. Provide details only when you've accumulated enough cash to perform each step.

Finally, for those opposed to bankruptcy, what would you suggest? The only potential way to avoid it would be either the complete nationalization of Detroit or for Detroit to shut down their worst markets (that being N. America).

I completely agree that the global market cannot support all 3 Detroit automakers. I'll give you 1 guess as to who should close their doors.

"I completely agree that the global market cannot support all 3 Detroit automakers. I'll give you 1 guess as to who should close their doors."

Ta Da. Assuming there is a finite amount of loans/capital available, it would certainly make more available to the two viable automakers. It would also go quite a ways to reducing the perception (and reality) that American cars are unreliable. Plus, maybe some of Chrysler's exterior designers can go over to Honda and make my drive in the morning a little more tolerable.

Unfortunately, in the next step from there you have to ask why we don't just give all 25 billion to Ford...

estreka - Government paid healthcare wouldn`t need to be corrupt and Medicare/Medicaid is very efficient with 2% of their costs being administrative compared to the typical 20-30% in insurance companies. All those people pushing paper getting your co-pays etc cost money and add no value to your healthcare.

Someone earlier mentioned that dealer ranks are being thinned and that is true with this economy but when the economy recovers and property values start to increase then those numbers of failures will drop away. GM needs a plan to eliminate 4-5,000 dealers and close Buikc, Pontiac and GMC. If they came to congress with this radical plan (for them) and asked for funding to cover buyouts and for legal immunity then they might get somewhere without even going into Chapter 11 or something similar.

But somebody, please think of all the HR Generalists that would loose their jobs if the Government provided healthcare!

Then again, I'd love to avoid the yearly benefits hassle.

"Hmmm...I know! Let's make the government run it!"

Exactly, this is why in other countries they get national healthcare for less cost than we get "fre market" healthcare. The government sets the mandates, they dont provide the healthcare. After watching this Wall Street meltdown its amazing that people are stupid enough to believe this "private sector is always better" nonsense. They did a bang up job on Wall Street, that's for sure.

"If providing health care is bringing down the Big 3, who's gonna bailout the Federal Government's attempt at it?"

I dont even understand your point. You bring down costs by increasing the pool of people negotiating for services and medicine. This is what the federal government does and they get cheaper care than the rest of us. Its likely better too.

"Someone earlier mentioned that dealer ranks are being thinned and that is true with this economy but when the economy recovers and property values start to increase then those numbers of failures will drop away. GM needs a plan to eliminate 4-5,000 dealers and close Buikc, Pontiac and GMC. "

Your healthcare comments are spot on. I dont agree that GM should unload 80% of their dealers. That is way too much. GM has a lot of smaller dealers which is one reason they will need more than Toyota to compete with Toyota. Toyota's dealers are newer and more suburban and far larger. Naturally the media doesnt mention this when they say Toyota "only" has 1600 dealers and sells double as many vehicles per dealer as a GM franchise. Closing the brands you mentioned woult likely cost GM 1.5m sales a year. How would you make those up? People are saying GM should grow by axing 3 brands and eliminating most dealers. That isnt a way to grow, that's a way to allow Toyota to take over the US market.

"Ta Da. Assuming there is a finite amount of loans/capital available, it would certainly make more available to the two viable automakers. It would also go quite a ways to reducing the perception (and reality) that American cars are unreliable."

Ford doesnt even need the money. In fact, I dont think they will get nearly as much as GM when this all goes through. Also, there is no lack of capital as evidenced by the billions being handed over to banks every week. There is plenty of money. The Dems want to give them $50B total including the plant conversion money while Bush wants them to take that money now for immediate operations.

Chrysler will likely go away or be sold off in the next few years anyway. I dont think Congress wants to tell Chrysler to disappear directly.

National health care is not free. The brits pay a huge amount of taxes.. a basic rate taxpayer pays £48.50 in tax on every £100 earned. Among higher rate taxpayers the figure is £57.10 (source timesonline.uk) ... Also just include the Vat tax of 17.5% on top of everything you buy. Do you think that will help Detroit by adding 17.5% on top of the price of 30K ford 150. The health care system is a log jam. Britons are now traveling to India for surgeries. If you like waiting a year for a procedure then you might like that system. Or if the government decides you’re not going to get treatment because you smoke or overweight. It is happening there, because the system is going broke. Social security is going under, medi care is not that far behind.

Bu to the sad state of affairs of that is the US auto market is shameful. I can only think of the legacy of the steel industry in Pittsburgh. The unions had very strong contracts and the management did not invest in new technologies. Thus most of the steel mills have been dismantled for many many years. Plenty of blame to go around. I want to buy a car from the big three, but there is nothing out that makes me want to buy one. I have had American cars with an Olds and a Pontiac and my dad liked Fords. My last 3 cars have been Toyotas, and I ready to write them off (over rated). I drive American when I rent a car when I travel and I haven’t seen a whole lot of cars from Ford, GM, or Chrysler that made me think twice. I did enjoy the new Ford Escape , but every time I get a mopar it just stinks. The road noise, shotty controls . The prices are high for these cars too,

I hate to say that GM and Chrysler will be the next Eastern or Pan Am airline/US Steel .. Once an industry leader but now something you will only read in the history books.

I don't support the bailouts either. I know few others that do.

The fact is, the money for this DOESN'T exist. No matter how loud you shout "YES IT DOES!".

Where does the government get their money from? The taxypayer? Well, sort of. Where they really get it from is the Federal Reserve. And where does the Fed get the money from? Well, they print it out of thin air!

The dollar is being devalued every time the Fed prints more money. Imagine how much less the money in your wallet is becoming when the government asks the Fed to print an extra $900 billion.