The automakers do not deserve a bailout. Let's see, we had an energy crisis in the 70's. They have had 3 decades to make energy efficient cars. Why should the American taxpayer bail them out for their failures. Toyota is estimating profit of 5.6 billion this year. Clearly it is possible to make money making cars. Let them fail. Read more about the stupidity of these bailouts for the automakers on my blog.

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Geek Politics

How about this option for the Big3?

First, tell them that only two are going to survive and in the future they will be referred to as the Big2. If this does not kick in gear the competitive spirits, then let them close their doors.

Second, award 'any' US company for the design of a hybrid-electric car, which gets 50mpg, which sells for a maximum of $15,000...and the award will be $1 billion.

Third, award 'any' US company for the design of a sedan-type car similar to a Toyota Camry in size and features with a 'combustion engine' which 'actually' gets 50mpg, which also sells for $15,000...and this award will be $1 billion.

Fourth, award 'any' US company for the design of an all-electric vehicle which sells for $15,000...and this award will be $1 billion.

Fifth, award 'any' US company for the design of a $15,000 sedan car which uses an alternative drive train which operates with sustainability and zero CO2 emissions...and this award will be $2 billion.

Now...the first two designs will be completed first and at this time the current Big3 will be asked to BID on the production of these cars, and only two companies will be awarded the contracts...along with start-up funds of $10 billion each. The third company will be on their own to survive or fail without government intervention.


Now if the USA and all it's resources cannot achieve these goals, with these gigantic awards, then it is absolutely stupid to invest another dime in the Big3...

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Did you know both our problems and the solutions can be found simply by looking in our mirrors...and...Never confuse the extraordinary stuff I think and write with that of a well-balanced person...

Talk about stupid and greedy....

House speaker seeks auto bailout bill
Tue Nov 11, 2008 6:44pm EST

By John Crawley and Donna Smith

WASHINGTON (Reuters) - House of Representatives Speaker Nancy Pelosi sought legislation on Tuesday to bail out failing automakers, saying she was confident an emergency measure would be approved next week.

Pelosi aims to amend the government's $700 billion corporate rescue law that now applies to banks and other financial services firms. No figure was given, but General Motors Corp, Ford Motor Co and Chrysler LLC are seeking $25 billion in urgent assistance.

"Congress and the Bush administration must take immediate action," the California Democrat said in a statement, to prevent what she called the potential "failure of one or more of the major American automobile manufacturers."

Senate Majority leader Harry Reid of Nevada said in a statement that Senate Democrats are "determined to pass legislation" to aid the auto industry but cautioned "it would only get done" with the help of Senate Republicans and the Bush administration....

So much for Democrats being anti-big business, and it doesn't look like it's gunna stop with Congress:

November 11, 2008
Bush 'rebuffed Obama on car industry bailout'

Barack Obama used yesterday's Oval Office meeting with President Bush to press for immediate aid for the struggling US car industry, according to leaked reports.

Mr Bush said that he could support some aid in exchange for approval of a free-trade agreement with Colombia – but there was no sign that either the President-elect or his Democratic colleagues were willing to bend on that issue.

Senior Democrats asked the Administration at the weekend to consider expanding the $700 billion bank bailout package to include assistance for car companies struggling under a legacy of debt and falling sales.

Mr Obama's spokesman, Robert Gibbs, said yesterday that the plight of automakers was one of a number of issues discussed in a two-hour meeting with Mr Bush to discuss the transfer of power at a time of war and financial crisis. Other issues included housing, mortgage foreclosures, and, more generally, "the need to get the economy back on track"....

3 cheers for the demagogue elected under the one-party system!

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Be curious, not judgmental. - Walt Whitman
Nothing happens unless first we dream. - Carl Sandburg

Reason-->Justice, Power-->Utility. Don't mix up the two no matter how closely they're interrelated.

Thursday, Nov. 13, 2008

Is General Motors Worth Saving?
By Bill Saporito

For months, General Motors had been telling everyone who would listen that bankruptcy was not an option. It had a $30 billion cash pile and plans to restructure the company as the economy rebounded and 2007 U.S. auto sales topped 16 million units.

Then came October. Sales plummeted an astounding 45% over the same period last year, a result of a slowing economy and a dearth of financing for would-be car buyers. Total U.S. car and light-truck sales this year could come in at 13.5 million, 2.6 million fewer than last year. "That's in nobody's business plan," says Kimberly Rodriguez, an automotive specialist with Grant Thornton. "The best planning in the world cannot survive that fluctuation." It's now clear that GM can't survive as an ongoing entity without massive federal assistance. The company is burning through more than $2 billion each month. It has $16 billion left. As if they were aboard a dirigible losing altitude, GM's bosses have been frantically throwing all manner of stuff overboard — retiree health-care benefits, people, assets, new car design — to conserve $5 billion. That will get it through the year. (See pictures of the 50 worst cars of all time.)

But 2009 is the year of reckoning for GM and the rest of the domestic auto industry, if not the economy as a whole. The GM crisis is raising once again the issue of how far the government should go in rescuing banks, insurance companies, mortgage holders, credit-card issuers and now carmakers. GM has no doubts about it. "Immediate federal funding is essential in order for the U.S. automotive industry to weather this downturn," GM president Fritz Henderson admitted to investors during a conference call in which GM announced a third-quarter loss of $2.5 billion.

No one is more aware of that need than Barack Obama, who carried Michigan by a huge margin. The President-elect is committed to helping the Detroit Three, and House Speaker Nancy Pelosi is leading a rescue party that plans to get a bailout bill in front of President Bush before Thanksgiving. So far, the President has offered only to speed through Congress an already approved $25 billion loan to help Detroit create new fuel-efficient models. But GM needs an additional $10 billion simply to pay its bills next year and $15 billion more to close plants, compensate redundant workers and dump some of its lesser-performing brands.

The issue boils down to a historic proposition: Is what's good for GM still good for the country?

"If GM were to go into a free-fall bankruptcy and didn't pay its trade debts, then the entire domestic auto industry shuts down," says Rodriguez. The system — the domestic auto plants and their interconnected group of suppliers — is far bigger than GM. It includes 54 North American manufacturing plants and at least 4,000 so-called Tier 1 suppliers — firms that feed parts and subassemblies directly to those plants. That includes mom-and-pop outfits but also a dozen or so large companies such as Lear, Johnson Controls and GM's former captive Delphi. Beyond those are thousands of the suppliers' suppliers.

Although the Detroit Three directly employed about 240,000 people last year, according to the industry-allied Center for Automotive Research (CAR) in Ann Arbor, Mich., the multiplier effect is large, which is typical in manufacturing. Throw in the partsmakers and other suppliers, and you have an additional 974,000 jobs. Together, says CAR, these 1.2 million workers spend enough to keep 1.7 million more people employed. That gets you to 2.9 million jobs tied to the Detroit Three, and even if you discount the figures because of CAR's allegiance, it's a big number. Shut down Detroit, and the national unemployment rate heads toward 10% in a hurry. (See Pictures of the Week.)

Even if just one of the Detroit Three — and GM is the most likely, as Ford is in better shape and Chrysler is much smaller — spiraled into a free-fall bankruptcy, the systemic effects, at least initially, would be huge. The whole industry would not be able to build cars in the U.S., because of the lack of parts. "Unlike the airlines or steel, when you look at the automobile industry and the fact that the whole supplier base is connected — to Ford, Chrysler, Toyota — it will have a ripple effect on the entire industry," says Nicole Y. Lamb-Hale, a bankruptcy expert at the Detroit office of Foley & Lardner, a law firm that represents some GM suppliers.

Read a report on GM and Ford.

A carefully planned, prepackaged bankruptcy would still be troublesome, she says. Throwing 479,000 GM retirees onto the rolls of the Pension Benefit Guaranty Corp., for instance, could overwhelm it. And GM's agreement to fund the United Auto Workers' voluntary employee beneficiary association (VEBA) — thus getting a $50 billion unfunded liability off its books — might then be in jeopardy, as would the union's health benefits. The VEBA has already saved GM nearly $5 billion in the past quarter, and still greater benefits lie ahead.

A bailout won't spare GM or its workers pain. Assuming the government bridges GM to the future — or provides debtor-in-possession financing in a bankruptcy — there is still a ton of restructuring to do. The company operates 21 plants in North America and has three more that are scheduled to close. But Grant Thornton's Rodriguez says that still leaves five to go to match demand. "They still need to take structural steps: reduce suppliers, reduce the number of plants, reduce the cost structure and get rid of excessive debt." Most analysts say GM has to dump underperforming brands too.

Shutting down plants and cutting labor are costly — it's one of the ironies of the auto business. Deutsche Bank estimates that GM would have to spend $12 billion to chop labor costs and compensate dealers who lose their franchises. That would lower GM's North American operating costs from the current $31 billion to $25 billion annually, says Deutsche Bank. (See pictures of the global financial crisis.)

None of this can happen without the cooperation of the UAW, which is probably feeling better knowing that Obama is on his way to Washington. Although it hasn't shown its hand, the UAW may try to mitigate job losses in the U.S. by pushing GM and Ford to build fewer vehicles in Mexico, according to Sean McAlinden, chief economist at CAR. Obama might be sympathetic to that argument; he said during the campaign that NAFTA needed to be re-examined. The carrot for GM is that any new workers it hires in the U.S. will make $13 to $14 an hour and collect limited benefits rather than work for $29 an hour and get full benefits — the old UAW wage.

There's also a legitimate question as to who would do the restructuring. GM CEO Rick Wagoner has made the case that his crew is best placed to run the turnaround since it knows where the cost buttons are. But critics like Jim Schrager at the University of Chicago Booth School of Business say the wrong people are in charge: "I think you would only put money in GM if you had a complete change in the board and the current management. They are diligent. They worked very hard, but it just hasn't worked." In Schrager's view, GM is a strategic failure. It can manufacture high-quality cars, but it neither makes the right kind nor markets them effectively. He'd bust the company up into three independent firms: Chevy, Buick-Pontiac-GMC and Cadillac-Saab-Saturn.

If that's ultimately where Detroit ends up, is it worth the price to get there? Put another way, does GM deserve to be bailed out or left at the mercy of the market and almost certain death? "The University of Chicago training in me says the market should prevail," says Schrager. "But the Chrysler bailout was a success, and, gosh, I'd love to save it." That sentiment is not shared by everyone, and it goes to the heart of the central economic debate facing the country — between hard-nosed capitalists, who believe the market should decide, and public-policy types who view the economy as something far more organic than a balance sheet. But ultimately, whether GM is dead or alive, the taxpayers are on the hook for billions, for everything from lost tax revenues to higher unemployment costs to taking over GM's pension obligations. The decision that Washington has to make is whether we pay for GM's survival or for its funeral.

— With reporting by Joseph R. Szczesny / Detroit

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Did you know both our problems and the solutions can be found simply by looking in our mirrors...and...Never confuse the extraordinary stuff I think and write with that of a well-balanced person...

Exactly.

We are supposed to be a free market capitalist society.

If a single person, including Obama, was talking about fixing the root cause of the economy and manufacturing in the USA, then I don't mind temporary bailouts or loans or whatever.

But when absolutely nothing is being done except to throw debt money into failing business models, it is not acceptable.

Sure Obama will spend $1 trillion of debt money on infrastructure jobs but this means the economy will be energized 'temporarily' by taxpayer debt. What happens when this bailout money stops flowing? If the root system is not also energized by being able to compete in this global marketplace, then we're back to the same problems except they are bigger each time...

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Did you know both our problems and the solutions can be found simply by looking in our mirrors...and...Never confuse the extraordinary stuff I think and write with that of a well-balanced person...

Why GM can't survive bankruptcy

Some companies use the courts to reorganize and come out stronger. That would be difficult for GM, experts say.

By Chris Isidore, CNNMoney.com senior writer
November 13, 2008: 5:38 AM ET

NEW YORK (CNNMoney.com) -- It worked for the airlines, but it might not work for General Motors. Saving the company through bankruptcy is probably not a viable option for the troubled automaker.

The reasons go deeper than the belief that consumers would shun a vehicle being sold by a bankrupt automaker. Some leading experts said that GM would find it exceedingly difficult to raise the billions in financing it would need to stay in business during a bankruptcy reorganization.

The bottom line: Unlike the experience of United, Delta and Northwest airlines, a GM (GM, Fortune 500) bankruptcy could spell a quick end to the company's operations.

The question of whether GM can survive is crucial to the growing debate in Washington over whether the government should put up $25 billion or more to bail out automakers.

GM on Friday, while saying it was working to avoid a catastrophic bankruptcy, disclosed that it has almost run out of cash and said it needs federal assistance before the end of the year. President Bush, who will be in office until Jan. 20, remains wary of a bailout.

Bailout advocates, including President-elect Barack Obama and the Democratic leaders of the House and Senate, argue that the collapse of a major automaker would be too great a shock for an already struggling U.S. economy to absorb. It is estimated that a GM bankruptcy alone would cascade widely throughout the economy and cost as many as 2.5 million jobs.

Some critics of a bailout have suggested that the automakers would be better off filing for bankruptcy to to get out of obligations and contracts they can't afford and become competitive again without putting taxpayer dollars at risk.

Cash troubles
There is precedent for bankruptcy turnarounds. But those companies, filing under Chapter 11 of the bankruptcy code, were able to secure what is known as debtor-in-possession, or DIP, financing.

Lenders make such loans in part because bankruptcy law allow them to go to the front of the line of the company's creditors if the company is not able to stay in business. In turn, the bankrupt company uses the cash to make changes and return to profitability.

Without DIP financing, liquidation -- usually under bankruptcy Chapter 7 -- may be the only option left.

Experts in the field and even GM itself say that DIP financing might not be available for GM.

"The state of the capital markets does make the prospects for DIP financing a much bigger question mark than would have been the case in other times," said Bob Schulz, Standard & Poor's senior auto credit analyst. "To reorganize does require financing."

Others question if GM would be shut out of DIP financing entirely. But even they say it would come at a steep price.

"I would say it is likely that they would find some financing," said bankruptcy attorney Ronald Silverman, a member of the American Bankruptcy Institute who recently spoke on the outlook for the auto sector. "It may not be inexpensive financing. But there are investors with cash interested in investment opportunities, and DIP loans are among the most attractive investment opportunities."

Still, the fear that car buyers won't want to buy cars from a bankrupt automaker may preclude GM from financing. For example, a recent survey of car buyers found that as many as 80% wouldn't even consider buying from a bankrupt automaker.

"You don't qualify for DIP if you don't have certainty about your revenue base," said Tony Cervone, a GM vice president.

Some question whether sales in fact would drop following a bankruptcy. University of Maryland economics professor Peter Morici believes automakers could assure buyers by offering warranties backed by third parties, the way bankrupt electronics retailer Circuit City is now doing.

But Mike Jackson, CEO of Autonation (AN, Fortune 500), the nation's largest chain of dealerships, said bankrupt automakers would have a hard time selling cars.

"I deal with consumers every day. They have their investor's hat on when they spend $30,000. They're making a calculation about resale value," Jackson said. "They have so many choices -- why take a gamble on a manufacturer who is in bankruptcy."

Change in the market
Most experts, even some of those who believe that GM would ultimately be able to find the financing it needs, agree that there is far less DIP financing available today because of the credit crisis.

"A year ago we had 30 DIP lenders; you could count on about 20 of them showing up in any big case. It was a buyer's market from a debtor's perspective," said Jack Williams, a bankruptcy law professor at Georgia State University and an ABI resident scholar. "Now we have three or four, maybe five, and they're all very careful."

Still, there are some who believe that GM should use bankruptcy to reorganize. And to them, a lack of financing to reorganize is just another argument against a federal bailout.

"If they can't get financing, then they should just sell the assets and go out of business," said Morici. "That means that bankruptcy reorganization is impractical; it means they can't be viable under any circumstance."


Find this article at:
http://money.cnn.com/2008/11/13/news...ion=2008111305

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Did you know both our problems and the solutions can be found simply by looking in our mirrors...and...Never confuse the extraordinary stuff I think and write with that of a well-balanced person...

If Ch 7 is necessary then it is necessary. These bailouts are getting ridiculous. Everyone has their hand out now. If GM goes out of business then other auto makers will acquire their assets and vehicles. Assuming they file Ch 7 and not 13. Now is a very difficult time to get DIP financing, that is agreed. One alternative is for them to file and reorganize (including changing union contracts) and GM gets whatever they can from bankers in a DIP and the government provides the remainder necessary as part of the DIP. This way they are covered and collect interest. If GM is unable to survive then there is a reason and it just shows the market is working as intended.

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91% of House Republicans have historically voted to increase the production of America’s own oil and gas. 86% of House Democrats have historically voted against.

The workers at those plants should just take over. Workers of the world, Unite!!!!!

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But the most common and durable source of factions has been the various and unequal distribution of property. The protection of these [unequal] faculties [of acquiring property] is the first object of Government. James Madison, Federalist No. 10

The history of all hitherto existing society is the history of class struggles. Karl Marx, Communist Manifesto

Democracy is a state, an organization for the systematic use of violence by one class against another. Lenin, State and Revolution

How to fix a flat car industry

By THOMAS FRIEDMAN
NEW YORK TIMES

Published: Thursday, November 13, 2008 at 4:21 a.m.

Last September, I was in a hotel room watching CNBC early one morning. They were interviewing Bob Nardelli, the CEO of Chrysler, and he was explaining why the auto industry, at that time, needed $25 billion in loan guarantees. It wasn't a bailout, he said. It was a way to enable the car companies to retool for innovation. I could not help but shout back at the TV screen: "We have to subsidize Detroit so that it will innovate? What business were you people in other than innovation?" If we give you another $25 billion, will you also do accounting?

How could these companies be so bad for so long? Clearly the combination of a very un-innovative business culture, visionless management and overly generous labor contracts explains a lot of it. It led to a situation whereby General Motors could make money only by selling big, gas-guzzling SUVs and trucks. Therefore, instead of focusing on making money by innovating around fuel efficiency, productivity and design, GM threw way too much energy into lobbying and maneuvering to protect its gas-guzzlers.

This included striking special deals with Congress that allowed the Detroit automakers to count the mileage of gas guzzlers as being less than it really was -- provided they made some cars flex-fuel capable for ethanol. It included special offers of $1.99-a-gallon gasoline for a year to any customer who purchased a gas-guzzler. And it included endless lobbying to block Congress from raising the miles-per-gallon requirements. The result was an industry that became brain-dead.

Nothing typified this more than statements like those of Bob Lutz, GM's vice chairman. He has been quoted as saying that hybrids like the Toyota Prius "make no economic sense." And, in February, D Magazine of Dallas quoted him as saying that global warming "is a total crock of (expletive)."

These are the guys taxpayers are being asked to bail out. And please, spare me the alligator tears about GM's health care costs. Sure, they are outrageous. "But then why did GM refuse to lift a finger to support a national health care program when Hillary Clinton was pushing for it?" asks Dan Becker, a top environmental lobbyist.

Not every automaker is at death's door. Look at this article that ran two weeks ago on autochannel.com:

"ALLISTON, Ontario, Canada -- Honda of Canada Mfg. officially opened its newest investment in Canada -- a state-of-the art $154 million engine plant. The new facility will produce 200,000 fuel-efficient four-cylinder engines annually for Civic production in response to growing North American demand for vehicles that provide excellent fuel economy."

The blame for this travesty not only belongs to the auto executives, but must be shared equally with the entire Michigan delegation in the House and Senate, virtually all of whom, year after year, voted however the Detroit automakers and unions instructed them to vote. That shielded General Motors, Ford and Chrysler from environmental concerns, mileage concerns and the full impact of global competition that could have forced Detroit to adapt long ago.

Indeed, if and when they do have to bury Detroit, I hope that all the current and past representatives and senators from Michigan have to serve as pallbearers. And no one has earned the "honor" of chief pallbearer more than the Michigan Rep. John Dingell, the chairman of the House Energy and Commerce Committee, who is more responsible for protecting Detroit to death than any single legislator.

OK, now that I have all that off my chest, what do we do? I am as terrified as anyone of the domino effect on industry and workers if GM were to collapse. But if we are going to use taxpayer money to rescue Detroit, then it should be done along the lines proposed in the Wall Street Journal Monday by Paul Ingrassia, a former Detroit bureau chief for that paper. "In return for any direct government aid," he wrote, "the board and the management (of GM) should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver -- someone hard-nosed and nonpolitical -- should have broad power to revamp GM with a viable business plan and return it to a private operation as soon as possible. That will mean tearing up existing contracts with unions, dealers and suppliers, closing some operations and selling others and downsizing the company . . . Giving GM a blank check -- which the company and the United Auto Workers union badly want, and which Washington will be tempted to grant -- would be an enormous mistake."

I would add other conditions: Any car company that gets taxpayer money must demonstrate a plan for transforming every vehicle in its fleet to a hybrid-electric engine with flex-fuel capability, so its entire fleet can also run on next generation cellulosic ethanol.

Lastly, somebody ought to call Steve Jobs, who doesn't need to be bribed to do innovation, and ask him if he'd like to do national service and run a car company for a year. I'd bet it wouldn't take him much longer than that to come up with the GM iCar.

Thomas Friedman is a columnist for the New York Times.

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Did you know both our problems and the solutions can be found simply by looking in our mirrors...and...Never confuse the extraordinary stuff I think and write with that of a well-balanced person...