An Urgent Message to GM Suppliers...

What is the problem with going into Chapter 11 bankruptcy? If it's so bad, why do we even have bankruptcy laws? Everyone should ask for a bailout from the government.

wilesmt said: Do not take this as an absolute fact, but I read somewhere (I cannot remember exactly) that part of the 3 million jobs at immediate risk were auto repair jobs. Something to the tune of 3/4 of a million jobs.

I mean, really? Why don't they include all the jobs at gas stations too. Its obvious that if the big three go under that we will have no use for cars anymore. Better yet, include all the gas truck drives, the twinke delivery drivers (who buys them anywhere but a gas station?), and the people who install the condom vending machines in the bathrooms.

This is fear mongoling at its worst, and to insist that this is not a bailout is insulting to my intelligence.
On NPR, they had someone from the auto industry on talking about it not just being the jobs at GM plants, but the car dealership and the diner across the street from the car dealership.

At that point, why not just include the flour mill and dairy farm for the diner across the street from the dealership.

smason1978 said:
The consequences of the domestic auto industry collapsing would far exceed the $25 billion loan needed to bridge the current crisis. According to a recent study by the Center for Automotive Research:

• One in 10 American jobs depends on U.S. automakers
• Nearly 3 million jobs are at immediate risk
• U.S. personal income could be reduced by $150 billion
• The tax revenue lost over 3 years would be more than $156 billion

Looking at this another way...if that much is on the line, it is almost criminal that the leaders of the US auto industry have done such a pathetic job. Maybe in return for the bailout the executives responsible for flushing the entire industry down the toilet will agree to lengthy prison sentences. Then we'd see how much they really care about the loss of American jobs.

wilesmt said: Do not take this as an absolute fact, but I read somewhere (I cannot remember exactly) that part of the 3 million jobs at immediate risk were auto repair jobs. Something to the tune of 3/4 of a million jobs.

They are confused. The -best- thing that could happen for auto-repair industry is for GM to file chapter 11, ditch half of the dealerships and close the "company service centers". It is absolutely amazing that a garage on a corner can do a terrific job on a GM vehicle using original or after markets parts at half price, in a quarter of the time and with zero attitude while GM dealership service center manages to periodically screw up the same/similiar job a few times, charge 3x to 4x as much and have attitude.

If GM is to purge its dealership ranks, the public perception of GM will go way up.

tazzy531 said: On NPR, they had someone from the auto industry on talking

Once I read that I knew that all objectivity had flown out the window.

Good points Geo.. but like many folks have said.. frankly I think bankruptcy is the ONLY way to "fix" the company. No question it won't be easy, but I don't see how they survive in their current form. It's simply inconceivable that this loan will allow the company to be very competitive with the foreign car manufacturers. This recession will last years.. and they won't be able to weather it with a mere $25B.

No question legal fees are quite high.. but it's still not that large in comparison to how much the companies are losing. These companies are losing billions, and we're talking about millions for legal costs. Not that significant imo.

While there are definetly warranty concerns, I'm sure there's SOME way to address this. Again, what's the real alternative..? We give them $25B, and they go bankrupt next yr vs. this year? Let's get it over with and right the ship.

wilesmt said: Do not take this as an absolute fact, but I read somewhere (I cannot remember exactly) that part of the 3 million jobs at immediate risk were auto repair jobs. Something to the tune of 3/4 of a million jobs.

I mean, really? Why don't they include all the jobs at gas stations too. Its obvious that if the big three go under that we will have no use for cars anymore. Better yet, include all the gas truck drivers, the twinke delivery drivers (who buys them anywhere but a gas station?), and the people who install the condom vending machines in the bathrooms.

This is fear mongering at its worst, and to insist that this is not a bailout is insulting to my intelligence.

Don't forget all the pilots that would be out of a job too!!!!!

I would feel more comfortable about my investment making a loan via Prosper than to GM/Ford.

GM for one also has other issues. One of the things that GM did last year was that it restructured its CEO's compensation packages because they (GM) feared that with the decline where it was last year many top CEO's would leave. Little did they know that it would only get worse and from what I understand their CEO's are set to make about 25-35 Million in bonuses through the end of this year and next.

Another article I read also outlined the simple fact that even if GM were to survive it would have trouble staying afloat simply because most Americans are buying fewer cars. With that being the case and with the whole image issue its only going to make it worse for GM every month.

GM Unions have touted the industry with their above normal Pension plans and Medical benefits (in some case they don’t pay any deductible or copays) and that has also been one of the main reasons for them to be able to provide the most cost efficient car to the consumer. With Toyota/Honda/Nissan having already established such a strong footprint consumers would see less and less reason to buy GM cars.

Shahhere

We have to save the 3 largest U.S. auto companies, and we can.

But we need to have strict impositions on the terms and use of the money. The UAW must be reigned in so that GM, Ford and Chrysler are not saddled with much higher labor and benefit costs than their foreign competitors (who build cars in the U.S. also, even though the profits go out of this country).

If the Big 3 representatives don't have the cajones to speak truth to the union, and make real progress, this is the opportunity of a lifetime.

You all really do not want GM, Ford and Chrysler, along with many of their suppliers, as well as the businesses that depend on those employees (diners to shops to many, many other family owned businesses) to go under...

...even if talking heads on TV or in newspapers claim otherwise.

And look at it this way - GM, Ford and Chrysler are asking for A LOAN of 1/28th the size of the 700 Billion Dollar of the NON-LOAN that the likes of Goldman Sachs, JP Morgan, Citigroup, Morgan Stanley & the rest of the Wall Street Gang that Couldn't Shoot Straight have received. Think about that. Can you really say it's fair to abandon the big 3 after giving more than 2 trillion to Banks and over a trillion to walls street investment firms that gambled their money away on subprime mortgages and other toxic assets?

It really is a matter of perspective.

I do agree that GM, Ford and Chrysler need to restructure their labor pacts completely - and if they can't on their own, let Congress insist on it. They'll be better off for it and so will we.

Each GM car includes $3000-5000 in BLOATED UAW retiree benefits and pensions. Thats one of the MAIN reasons that GM (and Ford/Chrysler) is uncompetitive.

Their current UAW contract includes things like paying 8000-10000 workers for "make work"/do nothing positions.

The government should ONLY give them Bridge Financing, AFTER they have entered Chapter 11, torn up all those UAW contracts, cleaned up management, and gotten realistic.

BTW here is the article I was referring to in my earlier post:

This one talks about how many cars are out there and how the slowed rate of growth directly affects that shrinking number which the US Automakers will have to compete:

http://blogs.moneycentral.msn.com/topstocks/archive/2008/11/17/w...

Here is the article which states how much bonuses are due to the Chrysler CEO's:

http://blogs.moneycentral.msn.com/topstocks/archive/2008/11/14/c...

Shahhere

shahhere, the government bailed out Chrysler with a loan in the early 80s. It saved hundreds of thousands of jobs, Chrysler paid the loan back, and things worked out - but Chrysler was not faced with the systemic credit crisis the big are today.

Countries that lose their manufacturing base ultimately are reduced to shadows of their former mighty selves, no matter what those endorsing a 'green revolution' with unseen jobs and unseen production facilities (for the most part) claim.

Manufacturing is essential.

As far as the bankruptcy issue, it is pretty credible that few people would trust an auto warranty if the company backing it is in bankruptcy. So, I do not see how that would add a further, crushing blow to any car company's chance of survival.

I completely agree that the UAW labor pacts need to go. I'm just saying that there are ways to accomplish that short of bankruptcy, which won't let these companies survive to live to fight again.

JesseLivermore said: We have to save the 3 largest U.S. auto companies, and we can.

But we need to have strict impositions on the terms and use of the money. The UAW must be reigned in so that GM, Ford and Chrysler are not saddled with much higher labor and benefit costs than their foreign competitors (who build cars in the U.S. also, even though the profits go out of this country).

So you're for government help in Chapter 11 bankrupcy. Good, so am I.


JesseLivermore said: You all really do not want GM, Ford and Chrysler [to go under]

You are right, I do not want them to. Jobs will be lost and people will be hurt. But I would much rather get it done with now than to put them on life support in the hope that they MAY be able to stand on their own in the future. In the same sense, I've never wanted to go to war. But if I had been alive in the 1940's, I would have supported getting into WWII, not because I liked it, but because it was better than the alternative.

JesseLivermore said: And look at it this way - GM, Ford and Chrysler are asking for A LOAN of 1/28th

They already got loan commitments of 25 billion. So 1/14 in total.


JesseLivermore said: the size of the 700 Billion Dollar

Paulson has come out and said he doesn't want 1/2 of the total and won't give it out. If the next administration uses the money, it will most likely go to loan modifications, not to banks. So 1/7th.

JesseLivermore said: of the NON-LOAN that the likes of Goldman Sachs, JP Morgan, Citigroup, Morgan Stanley & the rest of the Wall Street Gang that Couldn't Shoot Straight have received. Think about that. Can you really say it's fair to abandon the big 3 after giving more than 2 trillion to Banks and over a trillion to walls street investment firms that gambled their money away on subprime mortgages and other toxic assets?

AIG was loaned money, at a very high interest rate originally if I remember correctly. It also depends on how you define loan. They bought perfered stacks in the companies, that in my understanding pay interest. They are similar to loans that pay interest, but don't have a maturity.

Also, Fed injections are very short term loans, IIRC.

You are also making a very bad assumption - that everyone that is against bailing out the big three were for bailing out the financials. Many people are against both. Your whole argument righ here, in my opinion, is completly selfish. One wrong (the first bailout) does not justify another another (the second).

JesseLivermore said: I do agree that GM, Ford and Chrysler need to restructure their labor pacts completely - and if they can't on their own, let Congress insist on it. They'll be better off for it and so will we.

Once again, that is basicly what Chapter 11 is. I'm glad we agree.

Braney Frank this morning on NPR said that $25B is just a loan with us as a number 1 creditor so that we ar first when payback time comes.
Then he said that we want to give auto industry $25B in loan instead of Bankrptcy chapter-11. By March of 2009 they need to come back with plan. If plan looks viable then we will throw more money at them other wise they need to give back those $25B.

Mr. Barney Frank fails to realize that in March Auto industry can file for Bankrptcy keeping out $25B and there is nothing we can do about it.

Tri is ina ahole of -$60B and everyone knows that 25B is not going to change anything.
Executives would take those money in bonuses and they will still lay off workers if not now then in few months down the road.

American people are frustrated and I think Revolution is the only answer as our govrnment is not listening to will of the PEOPLE.

From Cato blog I found this interesting Reuters article. Honda opens new U.S. plant as Detroit seeks bailout.

"The rest of the country may have been debating the possible bankruptcy of America's iconic automakers on Monday, but in southeast Indiana more than 1,000 U.S. workers were cheering the opening of Honda's newest assembly plant."

"But for the Honda workers here, their jobs -- with a starting wage of $18.41 an hour -- are just as much part of the U.S. auto industry as those at their imperiled Detroit competitors. They just don't get as noticed."

"According to 2007 figures compiled by the Center for Automotive Research, foreign automakers including Honda, Toyota and Nissan employed some 113,000 workers in the United States, about half of the 239,000 employed by Detroit's Big Three."

"Cooper said it is too simplistic to say a bailout of Detroit is bad for the Japanese automakers -- because they, too, rely on suppliers that may go out of business if one of the Big Three fails. Besides, she said, the transplants seem to cope well even when the playing field is not level."

tazzy531 said:
P.S.
By the way, bankruptcy reorganizations can be enormously expensive. I was previously involved in a reorganization of a well known company in which just my firm's legal fees in connection with our representation of the lead lender in DIP financing exceeded $1MM (plus another $1MM in legal fees to structure exit financing). In another reorganization that I was involved in we once had a legal bill of about $700,000 after just ONE MONTH. In 2006 United Airlines paid about $100MM to its law firm, which was both its lead bankruptcy counsel and the aircraft-lease counsel. Delta paid about $45MM to its lead counsel and another $25MM to its aircraft-lease counsel. The primary counsel for the Delta Pilots’ Pension Preservation Organization billed over $1MM.

Thats another problem! Lawyers.

Just so I'm clear:

1) The Treasury & Fed Reserve have already injected 2 trillion into commercial and investment banks and brokerage firms, in one form or another, despite the advertised '700 billion bailout of Wall Street,' and that figure is certain to rise.

2) There is ZERO question that the Union's death grip on the Big 3 needs to be broken, forcibly.

3) There is ZERO question that the Big 3 needs to retool their plants to build vehicles that consumers desire, and that have improved quality. Ford and GM have improved their vehicle quality, IMO, but have a ways to go.

4) There is ZERO question, to be fair, that because of their already precarious balance sheets, the Big 3 were much more vulnerable to the credit crisis and economic downturn than their foreign competition. We can argue about fault now, but it's too late to do that if we really are interested in helping to save millions of jobs and a critical (IMO) American Industry.

5) There is ZERO question that the goals of a bankruptcy filing can be achieved without that course being taken, as long as conditions are imposed on the loans given, and that the effects of bankruptcy filing will be even fewer buyers because of warranty issues.

6) There is ZERO question that at least 3 million, and as many as 5 million jobs will be lost if we lose these three companies, and that will mean worse economic conditions for all, and less competition for American Consumers.

Perspective. After doling out 2 trillion to banks and Wall Street, with part of that taxpayer money being hoarded or used to pay bonuses and high executive compensation at the recipient entities, a lot of jobs can be saved and a lot of constructive good for the American Economy can be achieved with a fraction of that sum allocated as a loan to the Big 3, even if 2 of these companies survive (Ford and GM, for example).

FWIW, Ford's on the best track so far, and Mullaly is the most competent CEO of the three at the table.

Just an FYI - if these companies file for bankruptcy protection, *everything* under their financial contracts and obligations are up for grabs. Including pensions, salaries, work contracts, retirement benefits, etc...